Piercing Pattern

Today we will be looking at the piercing pattern. The piercing pattern is made up of two candlesticks, the first one black, the second one white, both with fairly large bodies and small tails (shadows). The white candlestick must open below the black candlestick and close at least half way up the body of the black candlestick. The piercing pattern is the opposite of a dark cloud cover and similar to a bullish engulfing pattern.

Application

Just like a bullish engulfing pattern, the piercing pattern is a reversal of a downtrend, therefore, it is considered bullish. The theory behind it is the bears have been in control of the stock (during the downtrend) and then the stock opens below the close of the first candle and the bulls take over.