What is the Piercing pattern’
The piercing pattern is a technical trading signal that is formed by closing the day with a good sized trading range, followed by a gap lower the next day with white candle, which covers at least half of the upward length of the previous day’s red candle body, ending close higher for the day. The piercing pattern often signals the end of a small to moderate downward trend.
Breaking the Piercing pattern’
The piercing pattern can serve as a potential indicator for a bullish reversal.
The Patterning Piercing
The piercing pattern is one of the few important candlestick patterns that technical analysts usually spot on the chart series. This model consists of two consecutive candles brands. The first candle is red/black to indicate day and the second is white/green, meaning day. When a trader looks for bullish reversal red candle followed by a white candle can be on the lookout.
There are a few things that set the pattern of the piercing in addition to the General red candles white candle. In the piercing pattern, the white candle should be red candle with a significant gap to close Red candle and white candle opens. On the second day white candle, the candle body also needs to extend to cover at least half of the previous day’s red candle. Usually a gap down and a significant increase over the closing price-a good sign for reversal. In the pattern of the piercing on the second day white candle closes at or above the medians of previous day’s red candle.
Pattern Piercing Testimony
The piercing pattern known in technical analysis to signal potential for a bullish reversal. The second day white candle bounce from the gap down to mid-high closure, is expected to be a sign that the support level has been reached. Thus, the piercing pattern can be confirmed, if it occurs at the support line of the price channel. The piercing pattern is usually only a potential signal for a turn, so the pattern, piercing the trader would like to see on a breakaway.
The gap of the gap pattern that occurs in the first phase of the turn. It is determined by the result of two consecutive white candlesticks with the second consecutive day, white candle, which shows a significant gap higher from the closing price the first day to the opening price on the second day. A piercing pattern followed by a gap, the gap can be very strong confirmation that a reversal is happening.
The bullish reversal, traders typically have two popular options. They can buy shares to benefit from the trend. They can also choose at the money option with a strike price below the current market price.