The fact that bulls were able to press further up into the losses of the previous day adds even more bullish sentiment. (2) A bullish candle that dips below the previous low but closes slightly above the midpoint of the prior candle. Pay more attention to the market context than to the exact form of the candlestick pattern.

Modified Hikkake Pattern: Learn How To Trade It

A piercing pattern on a candlestick chart indicates that a price downturn may be due for a reversal. As with other technical indicators, they are not perfect predictors of price action, and traders should assess a wide variety of indicators and market conditions when making an investment. The first candlestick is usually dark colored or red, signifying a down day, and the second is green or lighter colored, signifying a day that closes higher than it opened. The price soared from $11.39 to the resistance level of $14.83, regaining the lost ground. At this key level, the stock formed two « Bearish engulfing » reversal patterns, but the price increased to $15.88.

The piercing line is a bullish reversal candlestick pattern found at the end of a bearish trend that helps traders find potential reversal zones. A piercing pattern is one of a few important candlestick patterns that technical analysts typically spot on a price series chart. This pattern is formed by the two consecutive candlesticks previously mentioned and also has three additional important characteristics (as noted in the illustration above). For example, you could analyze the context to see if the Piercing Line is forming near a significant support level. Another form of confirmation might be a third candle that closes above the second candle’s close or technical indicators that confirm a trend reversal (such as divergences).

Is Piercing Pattern Bullish?

Near this level, bullish momentum began to fade, confirmed by a series of « Bearish harami » patterns, after which the price reversed and began to fall. However, when it comes to engulfing, the second bullish candlestick completely engulfs the first bearish candlestick’s body, closing above it. Second, it can help to confirm other indicators, such as support and resistance levels.

This pattern indicates a potential reversal in the downward trend, as the bulls can take control and push prices up. Traders may watch for opportunities to enter long positions when this pattern forms. ATAS enables you to load tick-by-tick data from cryptocurrency, stock, and futures markets, providing a comprehensive basis for analyzing exness broker reviews price and volume interactions. Piercing Line patterns are mirror images of the Dark Cloud Cover pattern.

The M30 chart shows that the « Piercing » pattern did not form properly, as the second candlestick did not overlap the first one by half but closed slightly lower. However, it did close at the important support level of $45.66, providing a preliminary signal for a bullish reversal. The white candlestick should close below the midpoint of the black candlestick’s body. The bearish piercing pattern can be found at the bottom of a downward trend, indicating that the bears are losing strength. A thrusting line is considered a strong bullish or bearish signal and often leads to a continued move in the same direction. When prices break out above or below the trendline, it can signify a trend change.

The second candlestick covers the gap and half of the bearish candlestick. A dark cloud cover is a warning sign that the bulls are beginning to lose control of the market and that the bears are beginning to take charge. The pattern is confirmed  when the next candlestick closes at a price that is even lower than the Dark Cloud Cover.

They watch for a tiny bearish candlestick to appear once a downturn has been established. Then they search for a bullish candlestick that opens below the previous bearish candlestick’s low but closes above its midpoint. Traders that recognise this pattern open a long position at the bullish candlestick’s close and place a stop loss below the low of the preceding bearish candlestick. Traders finally take profits at a predetermined level, such as a resistance level or a Fibonacci retracement level.

1. It also includes a gap down after the first day where the second day begins trading, opening near the low and closing near the high.
2. Market sentiment declined sharply after the news of the FTX exchange collapse in November, which caused Bitcoin’s price to drop to $15k.
3. Let us look at an example of how to employ a piercing line trading strategy.
4. It’s essential not to poke holes in your portfolio profits by properly identifying patterns when practicing technical analysis.
5. The piercing line candlestick pattern develops over two days, with the first stick dominated by sellers and the second by purchasers.

How to Read Candlestick Charts?

At this level, bears began to form the « Evening star, » « Hanging man, » and « Shooting star » patterns, warning that bulls are weakening and the trend is about to reverse at its peak. The « Shooting star » with a long upper shadow and « Bearish marubozu » patterns signaled buyers to close their long trades, pushing prices down to $26.91. After a sustained decline in the asset’s value or a prolonged accumulation phase, the pattern forms at the key support levels. According to the pattern trading rules, stop-loss orders should be placed below the lows of the first and second candlesticks when opening a long trade.

Since the Piercing Pattern means that bulls were unable to completely reverse the losses of Day 1, more bullish movement might be expected before an outright potential buy signal is given. Information in this article cannot be perceived as a call for investing or buying/selling of any asset on the exchange. All situations, discussed in the article, are provided with the purpose of getting acquainted with the functionality and advantages of the ATAS platform. Once you install the platform, you will automatically get the free START plan, which includes cryptocurrency trading and basic features.

Getting Started with Pattern Trading

It indicates that the supply of shares to be sold has reached its maximum, and purchasers have gradually begun to dominate the market, driving up lexatrade review the price of the shares. On average, it confirms 72.9% of the time across the 4120 markets studied. This pattern is generally confirmed within 2.3 candles or invalidated within 4.3. Out of all the patterns that technical analysis uses to try and understand markets, the Piercing pattern is one of the more successful. HowToTrade.com helps traders of all levels learn how to trade the financial markets.

How to Trade the Piercing Line Pattern Profitably

The piercing pattern is a useful tool for traders who are attempting to make sense of the movements in the market, despite the fact that no pattern is flawless. This pattern is valid since it assists traders in gaining a better understanding of whether the momentum of the market is bullish or bearish. If the market rallies after breaking through a previous low, this indicates that bullish momentum is likely present in the market. Another straightforward but critical factor to examine is the trade volume. If the volume on the second day is higher than usual, it is a stronger indicator that the downward trend is likely to end. If you’re looking for an effective trading strategy, look no further than the piercing line.

The Piercing Line is one of the technical analysis’s most popular candlestick patterns. It is a bullish reversal pattern that forms when the opening price is lower than the close of the previous candlestick, but the close of the current candlestick is higher than its opening. Even though the piercing line pattern is seen as a bullish reversal pattern, the same formation could be formed on the other side, meaning at the top of an uptrend.