{"id":42405,"date":"2023-05-23T19:53:23","date_gmt":"2023-05-23T14:23:23","guid":{"rendered":"https:\/\/www.5paisa.com\/finschool\/?p=42405"},"modified":"2024-08-12T20:09:57","modified_gmt":"2024-08-12T14:39:57","slug":"piercing-pattern","status":"publish","type":"post","link":"https:\/\/www.5paisa.com\/finschool\/piercing-pattern\/","title":{"rendered":"Piercing Pattern: Meaning, Formation &#038; Trading Setup"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"42405\" class=\"elementor elementor-42405\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-993586f elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"993586f\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-09a8c58\" data-id=\"09a8c58\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-a7ab6e6 elementor-widget elementor-widget-text-editor\" data-id=\"a7ab6e6\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<h2><strong>What Is a Piercing Pattern?<\/strong><\/h2><p><a href=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2023\/05\/5-1.svg\"><img fetchpriority=\"high\" decoding=\"async\" class=\"aligncenter wp-image-42412 size-full\" role=\"img\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2023\/05\/5-1.svg\" alt=\"\" width=\"1004\" height=\"855\" \/><\/a><\/p><ul><li>Piercing Pattern is a bullish reversal pattern that can be found at the end of a downtrend. This <a href=\"https:\/\/www.5paisa.com\/finschool\/course\/technical-analysis-course\/candlestick-patterns\/#Seven-Bullish-Candlestick-Patterns\">candlestick pattern<\/a> is used as an indicator to enter a long position or exit the sell position. This type of pattern is formed when the bulls and bears both fight to gain control over the prices.<\/li><li>The piercing pattern is made up of two candlesticks.\u00a0 The first candlestick should be red candlestick having a large real body and the second candlestick should be green in colour and should be below the low of the previous candlestick.<\/li><\/ul><h2><strong>How a Piercing Pattern Works <\/strong><\/h2><ul><li>A piercing\u00a0 forms when a security opens at a lower price than its previous close and immediately rebounds to make an intraday high and then closes at or above its opening price. The purpose of creating an outside reversal signal is to exploit divergence between two oscillators. The piercing line candlestick pattern is just one of many reversal signals that fall in to that category.<\/li><li>This pattern offers confirmation signals of reversals whenever the stock price has been pierced from below the opening price and closing price at a higher level than its opening price.\u00a0 These patterns are not common and are rarely formed.\u00a0<\/li><li>Therefore you should not be over reliant on this pattern. These patterns are rare and so they can give misleading signals. This is the reason why they are not popular among intraday traders. These patterns reliability might increase if the conviction from one more indicator can be drawn.<\/li><\/ul><h2><strong>Piercing Pattern Formation<\/strong><\/h2><ul><li>The formation timeline of this pattern is two days. The first candle in this pattern is influenced or dominated by sellers, whereas buyers dominate the second candle.\u00a0 The preceding candle of this pattern indicates a downward trend in the asset\u2019s price.\u00a0 Under this pattern, you can see that the supply of shares meant for selling has reached its upper ceiling. The second candle of this pattern starts with a small gap.<\/li><li>Gaps can only be formed if a security\u2019s opening price is higher or lower on the second day compared to the previous day\u2019s closing price. The second candle crosses at a value nearer to the opening price of the first day. In order to have a clear piercing line pattern, the second green candle shall cover at least half of the last day\u2019s red candlestick.<\/li><\/ul><h2><strong>Piercing Pattern Example<\/strong><\/h2><p><a href=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2023\/05\/4-1.svg\"><img decoding=\"async\" class=\"aligncenter wp-image-42411 size-full\" role=\"img\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2023\/05\/4-1.svg\" alt=\"\" width=\"1004\" height=\"855\" \/><\/a><\/p><ul><li style=\"text-align: justify; background: white;\"><span style=\"font-size: 14.0pt; font-family: 'Lato',serif; color: black;\">This is a daily chart of Sun Pharmaceuticals Industries Limited. The chart shows us that\u00a0SUN\u00a0was under a long bearish trend. At the end of the bearish trend, there is a large red bearish candlestick followed by a large green candle. <\/span><\/li><li style=\"text-align: justify; background: white;\"><span style=\"font-size: 14.0pt; font-family: 'Lato',serif; color: black;\">Let us consider that the red candle is P1 and the green candle is P2. The P2 candle started with a gap down open and then went further below, showing the strength of the bears still active in the trade. The P2 candle closed above the midpoint of the P1 candle. This move started the bullish reversal trend. After P2, the bullish trend continued.<\/span><\/li><li style=\"text-align: justify; background: white;\">A trader will enter the stock on the third day above the closing price of P2. The stop loss would be just below the low of P1. When the uptrend starts, the trader can continue to hold the stock bought on day three, till the stop loss is triggered. Or continue holding the stock with a trailing stop loss. Else the trader remains on the stock till another downtrend occurs.<\/li><\/ul><h2 style=\"text-align: justify; background: white; margin: 24.0pt 0cm 24.0pt 0cm;\"><strong>How to use Piercing Pattern? <\/strong><\/h2><ul><li style=\"text-align: justify; background: white;\">The piercing line pattern signals an overall bullish reversal trend in markets or related stocks. However the trader should be very cautious while using them for trading as it can give misleading signals. In piercing pattern the trader can visually see the second candle covers about half of the first candle for forming a piercing shape.<\/li><li style=\"text-align: justify; background: white;\">The red candle may not get covered in its entirety, implying that the bulls could not control the market completely and reverse complete losses of the first day.<\/li><\/ul><h2><strong>Ideal Trading setup for Piercing Pattern<\/strong><\/h2><ul><li><strong>\u00a0<\/strong>When the trader observes a piercing candlestick chart pattern he should wait until the high of the first candlestick is succeed by the previous bearish candle.\u00a0 This is an ideal trade setup when trading with the piercing candlestick pattern.\u00a0<\/li><li>The stop loss should low of the previous bearish candle. Piercing pattern is more suitable for day and swing traders as the rate of success are quite high in longer time frames.<\/li><\/ul><h2><strong>Conclusion<\/strong><\/h2><p>Thus piercing pattern is made of two candlesticks the first one is bearish and the second one is bullish candlestick. Piercing Pattern is a bullish reversal pattern that can be found at the end of a downtrend.\u00a0 It is found towards the end of\u00a0 a downtrend and is quite similar to the dark cloud ever. Investors must look at a few characteristics when they trade with this pattern and not forget to confirm the signals given by this pattern with other technical indicators.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-de52164 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"de52164\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-3a079cd\" data-id=\"3a079cd\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-8a15004 elementor-widget elementor-widget-heading\" data-id=\"8a15004\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Frequently Asked Questions (FAQs): -<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-7daf4eb elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"7daf4eb\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-9b178cd\" data-id=\"9b178cd\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-1652722 elementor-widget elementor-widget-accordion\" data-id=\"1652722\" data-element_type=\"widget\" data-widget_type=\"accordion.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<div class=\"elementor-accordion\">\n\t\t\t\t\t\t\t<div class=\"elementor-accordion-item\">\n\t\t\t\t\t<div id=\"elementor-tab-title-2341\" class=\"elementor-tab-title\" data-tab=\"1\" role=\"button\" aria-controls=\"elementor-tab-content-2341\" aria-expanded=\"false\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t<span class=\"elementor-accordion-icon elementor-accordion-icon-left\" aria-hidden=\"true\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<span class=\"elementor-accordion-icon-closed\"><i class=\"fas fa-plus\"><\/i><\/span>\n\t\t\t\t\t\t\t\t<span class=\"elementor-accordion-icon-opened\"><i class=\"fas fa-minus\"><\/i><\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t<a class=\"elementor-accordion-title\" tabindex=\"0\">How is a piercing pattern formed?<\/a>\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<div id=\"elementor-tab-content-2341\" class=\"elementor-tab-content elementor-clearfix\" data-tab=\"1\" role=\"region\" aria-labelledby=\"elementor-tab-title-2341\"><p>A piercing pattern is formed in candlestick charts when a bearish candle is followed by a bullish candle that opens below the previous close and closes above the midpoint of the bearish candle. It suggests a potential reversal of a downtrend.<\/p><\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t\t<div class=\"elementor-accordion-item\">\n\t\t\t\t\t<div id=\"elementor-tab-title-2342\" class=\"elementor-tab-title\" data-tab=\"2\" role=\"button\" aria-controls=\"elementor-tab-content-2342\" aria-expanded=\"false\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t<span class=\"elementor-accordion-icon elementor-accordion-icon-left\" aria-hidden=\"true\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<span class=\"elementor-accordion-icon-closed\"><i class=\"fas fa-plus\"><\/i><\/span>\n\t\t\t\t\t\t\t\t<span class=\"elementor-accordion-icon-opened\"><i class=\"fas fa-minus\"><\/i><\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t<a class=\"elementor-accordion-title\" tabindex=\"0\">What are the characteristics of a piercing pattern?<\/a>\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<div id=\"elementor-tab-content-2342\" class=\"elementor-tab-content elementor-clearfix\" data-tab=\"2\" role=\"region\" aria-labelledby=\"elementor-tab-title-2342\"><p>Characteristics of a piercing pattern include a bearish candle followed by a bullish candle, the second candle opening below the previous close, the second candle closing above the midpoint of the first candle, and a potential shift in market sentiment.<\/p><\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t\t<div class=\"elementor-accordion-item\">\n\t\t\t\t\t<div id=\"elementor-tab-title-2343\" class=\"elementor-tab-title\" data-tab=\"3\" role=\"button\" aria-controls=\"elementor-tab-content-2343\" aria-expanded=\"false\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t<span class=\"elementor-accordion-icon elementor-accordion-icon-left\" aria-hidden=\"true\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<span class=\"elementor-accordion-icon-closed\"><i class=\"fas fa-plus\"><\/i><\/span>\n\t\t\t\t\t\t\t\t<span class=\"elementor-accordion-icon-opened\"><i class=\"fas fa-minus\"><\/i><\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t<a class=\"elementor-accordion-title\" tabindex=\"0\">What is the target price for a piercing pattern?<\/a>\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<div id=\"elementor-tab-content-2343\" class=\"elementor-tab-content elementor-clearfix\" data-tab=\"3\" role=\"region\" aria-labelledby=\"elementor-tab-title-2343\"><p>The target price for a piercing pattern is typically the nearest resistance level or a previous support level that the price may retest as it potentially reverses its downward movement.<\/p><\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t\t<div class=\"elementor-accordion-item\">\n\t\t\t\t\t<div id=\"elementor-tab-title-2344\" class=\"elementor-tab-title\" data-tab=\"4\" role=\"button\" aria-controls=\"elementor-tab-content-2344\" aria-expanded=\"false\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t<span class=\"elementor-accordion-icon elementor-accordion-icon-left\" aria-hidden=\"true\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<span class=\"elementor-accordion-icon-closed\"><i class=\"fas fa-plus\"><\/i><\/span>\n\t\t\t\t\t\t\t\t<span class=\"elementor-accordion-icon-opened\"><i class=\"fas fa-minus\"><\/i><\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t<a class=\"elementor-accordion-title\" tabindex=\"0\">Can a piercing pattern indicate a trend reversal?<\/a>\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<div id=\"elementor-tab-content-2344\" class=\"elementor-tab-content elementor-clearfix\" data-tab=\"4\" role=\"region\" aria-labelledby=\"elementor-tab-title-2344\"><p>Yes, a piercing pattern can indicate a potential trend reversal from a bearish to a bullish trend. It suggests that buying pressure has entered the market and may lead to a shift in price direction.<\/p><\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t\t<div class=\"elementor-accordion-item\">\n\t\t\t\t\t<div id=\"elementor-tab-title-2345\" class=\"elementor-tab-title\" data-tab=\"5\" role=\"button\" aria-controls=\"elementor-tab-content-2345\" aria-expanded=\"false\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t<span class=\"elementor-accordion-icon elementor-accordion-icon-left\" aria-hidden=\"true\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<span class=\"elementor-accordion-icon-closed\"><i class=\"fas fa-plus\"><\/i><\/span>\n\t\t\t\t\t\t\t\t<span class=\"elementor-accordion-icon-opened\"><i class=\"fas fa-minus\"><\/i><\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/span>\n\t\t\t\t\t\t\t\t\t\t\t\t<a class=\"elementor-accordion-title\" tabindex=\"0\">How is the confirmation of a piercing pattern achieved?<\/a>\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<div id=\"elementor-tab-content-2345\" class=\"elementor-tab-content elementor-clearfix\" data-tab=\"5\" role=\"region\" aria-labelledby=\"elementor-tab-title-2345\"><p>Confirmation of a piercing pattern is achieved by assessing other technical indicators or price action signals, such as an increase in trading volume, support from trendlines or moving averages, or the occurrence of other bullish patterns. Confirmation helps validate the potential reversal signaled by the piercing pattern.<\/p><\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>What Is a Piercing Pattern? Piercing Pattern is a bullish reversal pattern that can be found at the end of a downtrend. This candlestick pattern is used as an indicator to enter a long position or exit the sell position. This type of pattern is formed when the bulls and bears both fight to gain &#8230; <a title=\"Piercing Pattern: Meaning, Formation &#038; Trading Setup\" class=\"read-more\" href=\"https:\/\/www.5paisa.com\/finschool\/piercing-pattern\/\" aria-label=\"Read more about Piercing Pattern: Meaning, Formation &#038; Trading Setup\">Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":42407,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18,180],"tags":[],"class_list":["post-42405","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blogs","category-trading-chart-patterns"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/posts\/42405","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/comments?post=42405"}],"version-history":[{"count":31,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/posts\/42405\/revisions"}],"predecessor-version":[{"id":59982,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/posts\/42405\/revisions\/59982"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/media\/42407"}],"wp:attachment":[{"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/media?parent=42405"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/categories?post=42405"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/tags?post=42405"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}