Piercing Candlestick Pattern
The Piercing candlestick pattern is a bullish reversal candlestick pattern. A Piercing candlestick indicates that the current downtrend may be near an end or may have already ended. As such, a Piercing candlestick pattern represents a potential buy signal.
When forming a Piercing candlestick pattern, the market typically gaps lower at the opening of the trading session due to a lot of early selling during the pre-market period.
But the selling rally is typically short-lived once the market officially opens as buyers step in to dominate the trading session. By the end of the trading session, the stock's share price has reversed course from its bearish opening and has closed at least 50% or more into the real body of the previous candlestick.
I believe that bullish investors help create the early selling frenzy by first selling shares in the pre-market activity to help create the the gap-down. However once the market officially opens the bullish investors immediately start buying shares.
By selling shares early before the market opens and creating the gap-down, I believe that the bullish investors are trying to create a "Bear Trap". This buying activity creates upwards pressure on the stock's share price throughout the day sending prices higher.
Listed below are the requirements for a Piercing candlestick pattern.
- It is a bullish reversal candlestick pattern
- The real body is always a green/white color
- It must close at least 50% or more into the real body of the previous candlestick, but below the top of the real body
- If the Piercing candlestick ends up closing above the previous candlestick's real body, the Piercing candlestick becomes a Bullish Engulfing candlestick
Characteristics & Observations
Listed below are the characteristics and observations for Piercing candlestick patterns that I have seen over the years......
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