Piercing Line
The piercing line is a bullish candlestick pattern that occurs during a downtrend. It is formed when a long black candle is followed by a white candle that opens below the low of the previous candle but closes more than halfway into the body of the black candle. This pattern indicates a potential reversal of the current downtrend.
Key Points
– The piercing line pattern is considered a reliable indicator of a potential reversal in a downtrend.
– To confirm the reversal, traders typically wait for the next candle to open higher than the close of the piercing line candle.
– The pattern is more effective when it occurs after a prolonged downtrend and is accompanied by high trading volume.
Trading Strategy
Traders looking to take advantage of the piercing line pattern may choose to enter a long position after the pattern is confirmed. Stop-loss orders can be placed below the low of the piercing line candle to protect against potential losses. Profit targets can be set based on previous levels of support and resistance.
