Piercing Line

Piercing Line - Overview

The piercing line pattern occurs in a downtrend and is comprised of two candlesticks. The first candlestick in the pattern is a long black candle, that is accompanied with high volume. The next candlestick makes a lower low, but then rallies to close above the midpoint of the first candlestick, but not above the open of that candle. This snap back rally is called a kirikomi, or cutback.

Piercing Line - Charting Example

The piercing line is one of the first signs that a potential bullish reversal is in play. Traders should wait for the high of the first candlestick in the pattern to be exceeded prior to taking a long position. Stops can conversely be placed below the low of the first candlestick of the formation. The more the second candle or kirikomi closes above the mid-point of the first candlestick, the greater the odds of a successful piercing line reversal pattern.

Piercing Line Candlestick