What it looks like
Two candles after a fall. First, a solid down candle. Second, an up candle that opens at or below the first candle's close and closes above the midpoint of the first body, but not above its open (that would be engulfing).
What it means
Sellers ended the first candle in charge, then buyers took back more than half of that candle's body in the next. Sellers had been in control and this is where they were stopped. It is a sign the fall is tiring, not proof that it has turned.
How to trade it
- 1
Confirm: wait for the next candle to close above the pattern's high.
- 2
Enter: buy on that close.
- 3
Stop: just below the pattern's low.
- 4
Target: 2 times the stop, or the nearest swing high.
- 5
Example: on gold 1 hour a piercing line forms at the previous day's low with a 14 point range. The next candle closes above its high; you buy with a 15 point stop and aim 30 points higher.
A close below the pattern's low.
Where it works best
At a floor after a fall, especially a level that already mattered, such as a prior swing low or a pivot.
WickSpeak finds the piercing line automatically on any chart and names it on the candles that made it. Next to the name it writes what the pattern is, how to trade it and what proves it wrong, so you never have to guess the rule. In Playbook you can use the piercing line, or any of the 146 patterns, as a condition alongside up to 12 conditions on any of 12 timeframes, then backtest it on past candles with your costs.
Common mistakes
- Accepting a close below the middle of the first body, which is too weak.
- Buying before the confirming close.
- Using it in the middle of a range.
Related patterns
Questions traders ask
Is the piercing line bullish?
Yes, it is a bullish two candle signal after a fall. It needs a close above the pattern's high to trade.
What is the difference between a piercing line and a bullish engulfing?
The piercing line's up candle closes above the middle of the prior down body but below its open. A bullish engulfing closes above that open, covering the whole body.
Does the open need a gap?
Classic rules ask for a gap down. In markets that trade around the clock, like gold and forex, opening at or below the prior close is the practical version.
What cancels a piercing line?
A close below the pattern's low.