Chapter 8 Piercing Pattern
The piercing pattern is a two-candlestick pattern. The first candlestick must be a bearish candlestick with a large real body and the second candlestick should be bullish and below the low of the previous candlestick. The second candlestick must close above the middle of the real body of the first candlestick, with the deeper it pierces the first candlestick the more significant the pattern becomes.
It is a bulling trend reversal or bottom reversal pattern that appears towards the end of a downtrend. It is the opposite of the dark-cloud-cover pattern, and appears in an downtrend. As the piercing pattern is a bullish trend reversal pattern, the presence of an existing down trend is a prerequisite.
In a daily chart, a piercing pattern features two days where the first is decidedly influenced by sellers and where the second day responds by enthusiastic buyers. This is potentially an indication that the supply for sell has been depleted somewhat, and price has been driven down to a level where demand of buyers has increased and been shown to be evident.
To learn more about the specific Bullish Piercing pattern that you've spotted, keep an eye out for the following characteristics:
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