UK Accounting Glossary
A piercing pattern is a candlestick charting pattern that can signal the bottom of a downtrend and a following reversal – it’s a bullish reversal pattern.
A long black candle the first day followed by a long white candle the second day characterizes the piercing pattern. The white candle in the piercing pattern must open below the closing price of the black candle and close within the body of the black candle. Traders believe the deeper the white candle in the piercing pattern penetrates the black candle’s body, the more likely a security has reached a bottom. Some technicians prefer a piercing pattern to exhibit white candle penetration into the top half of the black candle. Confirmation of the piercing pattern comes on subsequent days of upward trading. The piercing pattern is related to the bullish engulfing pattern except that the white candle of the piercing pattern doesn’t engulf the black candle. The bearish counterpart of the piercing pattern is the dark cloud cover pattern.
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This glossary post was last updated: 6th February 2020.