Piercing Line

The market moves in a downtrend. The first red real body suggests that it continues to do so. The next day the market opens lower via a gap. Everything now goes, as bears want it. However suddenly the market surges toward the close, leading the prices to close sharply above the previous day close.

Now the bears are losing their ground and overtaken by the bulls. The potential buyers start thinking that new lows may not hold and perhaps it is time to take long positions.

In the Bullish Piercing Pattern, the greater the degree of penetration into the red real body, the more likely it will be a bottom reversal. An ideal piercing pattern will have a real green body that pushes more than half way into the prior session’s black real body.

A confirmation of the trend reversal by a green candlestick, a large gap up or by a higher close on the next trading day is suggested.

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