Piercing Line candlestick pattern: A bullish trend reversal signal used by experts

bullish piercing line

Piercing line candlestick pattern is yet another very important bullish trend reversal pattern that is strategically used for a gap up and gap down trading techniques.

I hope you have seen my other two article of candlestick pattern “Bullish Kicker” and “Bearish Kicker” on Gap up and Gap down trading techniques.

Piercing pattern or piercing line pattern candlestick is usually found and used while trading stock and commodities.

It is very useful and important pattern. As a trader, you should not ignore such patterns. When identified properly it becomes very helpful and you can make a profit on the move.

Let’s see how can we make profit with this bullish pattern

Physical appearance of piercing line candlestick pattern

This pattern is very significant when found after a downtrend, where the market is in complete bearish mode. The market sentiments are low and sellers are dominating the market

  1. With this, the first candlestick for this pattern should be long bearish candlestick signifying strong bearish sentiment in the market. The body should be sufficiently long
  2. The second candlestick should be bullish and start with a gap down, that is the open price is below the close price of the bearish candle.
  3. The second candlestick should have a close price above the mid price value of bearish candlestick
  4. It is not always necessary but helpful and confirms the trend if a small bullish candlestick is formed that is the third candlestick.
piercing line candlestick pattern example_1_1
Source: Economic times

Market interpretation of Piercing line candlestick pattern

Each candlestick in this pattern has its importance for interpreting the market. It is not always that the confirming candlestick needs to be monitored. Here I will share its significance separately

  1. The first bearish long candlestick interprets the market condition where sellers are dominating and complete bearish sentiment exists in the market. You would rather find that this may persist in next few sessions
  2. The bullish signal appears with the formation of second bullish candlestick where there is Gap down the opening. But as the bullish candlestick closes above the mid price value you can interpret that the market which was bearish has now reversed its direction. So the market has which was bearish but buyers have now convincingly and confidently rejected the gap down and closed the bearish sentiment.

This way you can say that now buyers are active, optimistic and dominant in the market

The best part comes if you find a bullish candlestick after this that is the third candle which gives a confident confirmation. but don’t worry that may not happen always but the interpretation remains the same.

In any case, you need to get double confirmation from rest of your indicators to make sure your interpretation is working with your expectations

Don’t miss these 5 critical signs from candlestick charts

Try this out before you jump

So it’s better to analyze previous year charts and train your eyes before you get wrapped in the market. So here are few examples that may help you

piercing line candlestick pattern example__3
Source: Economic times


piercing line candlestick pattern example__2
Source: Economic times

Key elements to remember

    1. The first candlestick should have a longer bearish trading range and should form a low in a downtrend.
    2. The second candlestick should have close price above the mid price value of bearish candle
    3. This pattern works well when identified in a downtrend willing to form a better bearish trading range.
    4. Get confirmation with your technical indicators for a better result.

Learn the most active trend reversal signals

  1. Doji candlestick pattern
  2. Spinning top Candlestick pattern

Bottom Line

There are so many trend reversal signals in candlestick pattern that can help you find perfect entry-exit time on the market. But it is always advised to get double confirmation of your trend direction from technical indicators like moving averages and oscillators. All you need to do is train your eyes to coordinate with your brain and identify the best possible way to handle market fluctuations and the make your move in the market.

Post Author: Sushant Putatunda

Leave a Reply

Your email address will not be published.
Required fields are marked *