Piercing Line

The Piercing Line pattern is made up of two candlesticks that indicate a possible bullish reversal. This candlestick pattern is likely named "piercing" due to the way the closing price of the white candle "pierces" through the midpoint of the preceding black candle.

The Piercing Line pattern consists of two candlesticks, with the second candlestick opening lower (or gapping down) compared to the previous candle. Following this, buyers push the prices up, closing above 50% of the body of the first candle. This pattern serves as a warning for sellers, as an upward reversal may be on the horizon.

To identify a Piercing Line pattern, look for the following criteria:

• There must be a clear and definable downtrend in progress.
• The first candlestick (which appears at the end of the downtrend) must be a bearish candlestick.
• The second candlestick must be a bullish candle.
• The second candlestick must open below (gap down) the black candlestick and close above the midpoint of the black candlestick.
• If you draw a line through the vertical center of the black candlestick, the white candle must close above it.

The first candle indicates that the price is clearly in a downtrend, with bears in control. In the second candle, although the bears continue to push the price down at the beginning of the session, the bulls step in and push back. The price reverses sharply, closing near the session's high, nearly recovering from the previous candle's price drop.

To analyze a specific Piercing Line pattern, consider the following:

• The longer the two candles are, the more significant the reversal.
• The larger the gap down from the black candle to the white candle, the stronger the potential reversal.
• The higher the white candle closes on the black candle, the more likely the reversal is to occur.

The Piercing Line is the opposite of the Dark Cloud pattern, which is a bearish reversal pattern that appears after an uptrend, signaling potential "rainy days" ahead.