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Piercing Line Candlestick Pattern

candle pattern

This may work in some cases but it is risky because in a bear trend, what often looks like a swing to bullish sentiment can flip the other way. In a piercing line pattern, you can visually see that the second candle covers about half of the first candle for forming a piercing shape. The red candle may not get covered in its entirety, implying that bulls could not control the market completely and reverse complete losses of the first day. At the end of the bearish trend, there is a large red bearish candlestick followed by a large green candle. Let us consider that the red candle is P1 and the green candle is P2. Therefore it can be presumed that the reveal occurs after a downtrend.

market conditions

  • Much like many other trend reversal patterns, technical traders use the piercing pattern to spot new price trends and find buying opportunities.
  • The Closing Marubozu is a 1-bar continuation candlestick pattern.It’s a long candle close at it’s high or low .
  • The pattern comes up when there’s an uptrend in the market and when there’s also a pullback.
  • Backtesting the pattern in different market conditions to determine its effectiveness.
  • Instead, to combat this difference, you would like to see that there is a lower wick that formed immediately after the opening.

The real body of candle 2, should cover the real body of the 1st candle at least by 50 % from below. Introduction Candlestick charts are technical tool that put together data for numerous time periods into single price bars. This enables them to become more important than traditional open-high, low-close bars or simple lines… The Thrusting candlestick pattern is a two-bar pattern.The second candle gaps up/down and then retrace to close within the 1st candle’s body. Statistics to prove if the Thrusting pattern really works What is the Thrusting…

Bearish engulfing is owned and operated by NERD CURIOSITY MEDIA PRIVATE LIMITED. Content shared on this website is purely for educational purposes. Trading and/or investing in financial instruments involves market risk. and its authors/contributors are not liable for any damages and/or losses caused due to trading/investment decisions made based on the information shared on this website. Readers must consider their financial circumstances, investment objectives, experience level, and risk appetite before making trading/investment decisions.

  • The pattern shows traders that, despite some selling pressure, buyers are retaining control of the market.
  • Thus a trader can have a prior conviction on his trade outcome.
  • An increase in the market volume indicates that the bulls are taking over, and the upward trend has started.
  • A strong white candle adds evidence that the selling is over and that new buyers can enter for a short term upswing.
  • It is also best to trade piercing line patterns when they confirm a buy or sell signal from divergences in momentum indicators.
  • The stalled candlestick pattern is a three-bar pattern that predicts an upcoming reversal of the trend in the market.

However, when they do form, they are solid indicators of a reversal. Like all technical analysis tools, piercing line patterns are best combined with other indicators to maximize their efficacy in assisting in trade decisions. A Piercing line candlestick pattern is a two-day bullish candlestick reversal pattern that appears in a downtrend. It signals a potential short term reversal from downwards to upwards. It consists of two major components, a bullish candle of day 2 and a bearish candle…

It opens within the body of the previous candle and closes… The upside gap two crows candlestick pattern is a 3-bar bearish reversal pattern.It appears during an uptrend. Statistics to prove if the Upside Gap Two Crows pattern really works What is the upside gap two crows candlestick… The Takuri candlestick pattern is a single candle bullish reversal pattern.

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76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Whereas the piercing pattern pushes the lower price past 50% of the previous trading sessions candlestick, and therefore, shows intention behind a possible change in trading direction. Most candlesticks can produce strong signals of a reversal or a price continuation.


The second candle has to rise and close below the top of the red candle. Piercing pattern candles that appear within a third of the yearly low perform best — page 619. The P2 candle started with a gap down open and then went further below, showing the strength of the bears still active in the trade. The best way to chart candlestick is using the TradingView solution.

Construction of Piercing Line Pattern

The pattern comes up when there’s an uptrend in the market and when there’s also a pullback. A Piercing Line is an indicator used in technical analysis that suggests a reversal in the current trend. This signal is created when the price of an asset moves below a previous low, and is then followed by a period of consolidation before breaking above the high of the initial candlestick. The next bearish candlestick’s beginning point is lower than the preceding bearish candlestick’s closing point. The bulls boost their demand, and the price begins to rise. After the day, the bulls prevailed, and the closing price was higher than the center of the previous bearish candlestick.

In general gaps (e.g. Falling Window) are creating strong resistance zones and they should not be ignored. Attention should be paid to Long White Candle, which opened significantly below the level of the second line of the Piercing pattern. However, the bulls managed to close the candle much higher, confirming the support zone formed by the second line of the Piercing pattern. TradingWolf and all affiliated parties are unknown or not registered as financial advisors.

When the oscillators like the or Stochastics are showing a bullish divergence, the Piercing pattern can perhaps become more meaningful. Thus, there are considerable advantages of following and studying such piercing line candle stick. Firstly, even a beginner can identify a piercing line candlestick and so can an expert. One must only call it a piercing line pattern if the size of the bullish candle is more than 50% of the previous candle. Therefore, with the formation of a piercing line pattern, one can use various indicators that prove to be helpful. The size of the second candle, i.e., the bullish candle plays a very crucial role in a piercing line pattern.

bullish reversal pattern

The color of the real body of the short candle can be either white or black, and there is no overlap between its body and that of the black candle before. It shows that the selling pressure that was there the day before is now subsiding. It is advisable to enter a long position when the price moves higher than the high of the second engulfing candle—in other words when the downtrend reversal is confirmed.

The seems to be in a downtrend and while the opening price of the security is high, there continues to be a selling pressure in the market. This type of pattern usually occurs towards the end of a downtrend and in formation, it is similar to a dark cloud over. This pattern is usually observed after a period of downtrend or in price consolidation. The Bullish Engulfing pattern appears in a downtrend and is a combination of one dark candle followed by a larger hollow candle.

This bearish candlestick is typically a Marubozu candlestick with no upper or lower shadows. The piercing line candlestick pattern is not a standalone trading signal. It should be used in conjunction with other technical indicators and analysis to confirm a potential reversal. The weekly EUR/USD chart above shows the presence of a piercing pattern highlighted in blue. Preceding this pattern is a strong downtrend as indicated by lower lows and lower highs. The piercing pattern involves two candlesticks with the second bullish candlestick opening lower than the preceding bearish candle.

It has a big candle, a gapped down doji and then a big green gapped up candle.The bearish abandoned baby follows an uptrend. The piercing line patterns can be spotted regularly on the price charts of various securities – like those of stocks, ETFs and market indexes. Since it appears commonly, one must remain cautious to only enter into a trade when all the necessary requirements are met. Many may end up as false signals, if the signals are not read properly. The piercing line candlestick pattern develops over two days, with the first stick dominated by sellers and the second by purchasers.

How can they help you enhance your trading strategy?

Another sharp move then follows this move in the same direction. While there are many pros to using a piercing line pattern when trading, it is important to remember that no single indicator is perfect. It is always best to use multiple indicators in conjunction with one another to make the most informed trading decisions possible. Many people use it when trading because it is simple and easy to understand. The Piercing Line Pattern occurs when a bearish candle follows a bullish candle, and the close of the second candle is lower than the midpoint of the first candle. This pattern indicates a potential reversal in the downward trend, as the bulls can take control and push prices up.

Trading candlesticks like the piercing line needs strict discipline and emotion-free trading. Candlestick trading is a part of technical analysis and success rate may vary depending upon the type of stock selected and the overall market conditions. Use of proper stop-loss, profit level and capital management is advised. During the initial downtrend prior to the formation of the piercing line patter, the sellers are in control of the market and have had an edge over the buyers . This leads to a few red-colored candles getting formed, after which the green-colored piercing line appears. This situation now moves from seller-dominant to buyer-seller equilibrium.

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We have no knowledge of the level of money you are trading with or the level of risk you are taking with each trade. Finally, the bullish candlestick must have an opening price that is lower than the closing price of the bearish one. Firstly, it only signals towards a bullish reversal pattern only.

If trading volume breaches the average trading volume of the past few days, it is another strong signal that the downtrend is likely to end. This is a bullish indicator candlestick which implies that the market or a particular stock will move upwards. This pattern gets formed after an extended bearish run in the markets. Several analysts see the formation of this pattern as a re-emergence of bullish market sentiments.

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The second candle completely ‘engulfs’ the real body of the first one, without regard to the length of the tail shadows. The next candle should open below the low of the black candle. Discover the range of markets and learn how they work – with IG Academy’s online course.

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