A Piercing Line is a candlestick pattern that is used in technical analysis. This pattern consists of two candlesticks, with the second one piercing the first. The first candlestick is a bearish candle (with a close price below the open price). While the second candlestick is a bullish candle (with a close price above the open price). This pattern suggests that buyers have taken control of the market and are driving the price higher.
The two-day candlestick price pattern known as a piercing line pattern indicates the possibility of a short-term trend reversal from an upward to a downward direction. The first day beginning close to the high and closing close to the low. With an average or wider trading range is part of the pattern.
In addition, there is a gap down after the first day of trade, with the second day starting close to the low and finishing close to the high. Additionally, the close should be a candlestick that extends at least halfway up the red candlestick body from the day before.
How to Identify a Piercing Line Candlestick
To identify a piercing line candlestick, you have to look out for the following;
- A clear and distinct downtrend must be in progress,
- The first candlestick, which emerges after the downtrend, should be a bearish candlestick,
- The second candlestick should be a bullish candle,
- The black candlestick must open lower (gap down) the black candle and then close at least halfway on top of the black candlestick,
- This pattern has three characteristics: a gap following the first day, a downward trend preceding the pattern. With a powerful reversal occurring as the pattern’s second candle.
