Bullish Piercing Pattern


https://trading-market.org/ Engulfing pattern needs a prior down trend and the 2nd candle should completely engulf the previous candle. Hence I ‘m afraid you can call this a bullish engulfing pattern. Multiple candlestick patterns evolve over two or more trading days. Here P2’s blue candle engulfs just under 50% of P1’s red candle. For this reason, we do not consider this as a piercing pattern. From my own personal trading experience, I can tell you that whenever a doji follows a recognizable candlestick pattern, the opportunity created is bigger.

downward trend

It is important to note that you should analyse signals of other market indicators and compare them with results obtained from piercing line patterns to make the trade error-free. In our example, buyers not only filled the gap, but they also pushed the price beyond 50% of the body of the previous down candle, a sign of strength. Strength can be measured by how far above the 50% line the green candle closed. If it had closed above the red body, then we would have had a bullish engulfing pattern, another moderately high-probability prediction of an imminent reversal. Market sentiment has shifted, and in this case, the bulls are on the run. The signal is to go long on the euro, but confirmation from another technical source is always advised.

The Bullish Engulfing

However, the risk-averse would have completely avoided taking the trade. The second bearish engulfing pattern would have been profitable for both the risk taker and the risk-averse. At some key level, institutional traders will try to capture the retail traders before price trend reversal because they don’t want retail traders to profit. So they will make a false breakout of key levels in the form of a gap. Because at resistance breakout, retail traders will buy thinking of a breakout, but market makers have thought something else.

Your actual trading may result in losses as no trading system is guaranteed. The Piercing Pattern may show a possible trend reversal if it occurs after the long downtrend. When the oscillators like the RSI or Stochastics are showing a bullish divergence, the Piercing pattern can perhaps become more meaningful. Piercing Candlestick Pattern on a chartA key thing to remember is Piercing is a short-term pattern. This means that Piercing Pattern can only indicate trend reversals for short periods. The white candle opens lower, but closes above the mid point of the black body and below the open.

Set the stop below the https://forexaggregator.com/ of this bullish 5-minute candle. The second 5-minute chart opens with a bit of weakness, then rallies strongly above the Hammer candle. We are looking to capitalize on shorts who are taking their profits and covering, along with dip buyers who are taking a chance here on the oversold conditions.

Bullish Engulfing

We are sharing premium-grade trading knowledge to help you unlock your trading potential for free. If you have any questions or found value in this piercing line pattern guide, please feel free to share on social media & reach out to us. These are easy to obtain take profit levels and have a high degree of the market to trade towards the nearest resistance level. You can see in the piercing line pattern example above I’ve used the Gann box tool to quickly measure it.

Somehttps://forexarena.net/s the inverted hammer also appears in the downtrend and represents a likely trend opposite. All patterns express intense buying pressure and can be an entry indication for a bullish position. The Bullish Engulfing pattern appears in a downtrend and is a combination of one dark candle followed by a larger hollow candle. An aspiring Finance student became obsessed with the stock market and decided to help beginners learn about it more easily. Created a website that would provide strategies and technical knowledge on how to get started in the stock market.

Besides illustrating this point, I also want to draw your attention to chart analysis methodology. Notice in this particular chart, we did not just look at what was happening on P1 or P2. Still, we went beyond that and actually combined two different patterns to develop a comprehensive market view. When that is the case, the piercing line and bullish engulfing pattern do not form. By comprehending the roles of patterns and which candlesticks are commonly seen in the market, traders can more often spot the trading opportunities. The bearish piercing pattern represents that sellers have become more potent after a long uptrend than buyers, and now the price will decrease.

Limitations of piercing candlestick patterns

Piercing Pattern resulting in huge Up Trend ,notice the high volume of second candle in piercing pattern giving extra confirmation to Pattern. So, the trader must wait for the second-day trade to be completed. The green candle of the second day must cover the midpoint of the first-day candle. The action of bulls is the indicative feature of the second candle. From the second candle bulls win and start to take the market upwards.

As shown in the image, the hanging man candle has a long wick and a small body. Every pattern only works perfectly at a specific location or trend. Candlestick is one of the most used variables representing price with open, close, high, and low.

technical indicators

As the above image shows, there were first powerful bullish candle and then next candle opens gap up and cover the entire bullish candle. This pattern has a neckline, causing two candles to close at the same levels and form a horizontal neckline. The third candle confirms the change in trend by closing above them. We can open buying positions after the completion of this pattern.

A bullish engulfing pattern represents a change in downtrend sentiment, and traders can go long or buy the crypto asset on a breakout. Aggressive traders buy immediately on spotting this bullish pattern, while the more conservative traders would need more confirmation like breakout and price retest. The bullish engulfing pattern is one of the most widely used price reversal patterns most traders come to identify before other advanced patterns.

Technical View Nifty forms bullish Piercing Line pattern, all eyes on 17,500 now – Moneycontrol

Technical View Nifty forms bullish Piercing Line pattern, all eyes on 17,500 now.

Posted: Mon, 17 Oct 2022 07:00:00 GMT [source]

During the formation of this pattern, initially, there is certain indecisiveness at support levels. Later, the situation reverses, and the bulls or the buyers gain control and push bears out of the scene. The risk-averse will initiate the trade, the day after P2 only after ensuring that the day is a red candle day. And in the case of the bullish engulfing that engulfs the entire previous day’s candle, it takes out even more stops. These candle patterns help predict future price movement but do not guarantee success. While these patterns have a high win rate, there is still a chance of failure.


If you are looking to trade forex online, you will need an account with a forex broker. If you are looking for some inspiration, please feel free to browse my best forex brokers. I have spent many years testing and reviewing forex brokers. IC Markets are my top choice as I find they have tight spreads, low commission fees, quick execution speeds and excellent customer support. Piercing Candlestick Pattern bullish divergenceThe chart above demonstrates Stochastics showing a bullish divergence. This is an indication of a Piercing Pattern confirmation.

  • The color of the body does not matter, although a red body is more powerful than a green one.
  • As such, we can benefit from introducing systematic criteria to ensure that the market is oversold when we enter.
  • Three black crows pattern form when three bearish candles with no wicks are open above the previous candle’s closing and still close below the last candle’s low/ closing.
  • The piercing pattern is a bullish trend reversal pattern.
  • A white candlestick opens on the second day with a gap down and closes more than halfway into the body of the first day.
  • All the candlestick discussed above is another tool used by many technical analysts.

The ‘spinning tops’ suggest indecision, but one gap remains unfilled. The yield on this trade from a conservative perspective could have ranged from 200 to 300 pips, a very positive result. With time, you will get to know more about candlestick patterns and their trick of higher success chances.

The second candlestick opening with a bearish gap presents high expectations of bears. However, the second candle closes against the expectations of bears on a strong bullish note. Therefore, a Piercing pattern tells traders of an upcoming change of trend and also signals that bearish traders are now losing control. Unlike the second example, this third example is more straightforward.

If you have a Margex account, you will have access to these new features and technical analysis tools, which are built with real-time prices to help you make money trading. The morning star bullish pattern consists of a bearish candle, indecision or Doji candle as many would call it, and a bullish candle. Let us focus on the more common bullish chart patterns traders can explore to increase trading profitability. Acquiring the skill of a technical analyst for the financial market, as well as a thorough understanding of various strategies, such as bullish chart patterns, to increase profitability. It is an automatic condition that when both bulls and bears are highly active, the volume would be large. On P1 the volume will be large when bears win over the bulls.

  • This is the reason why they are not popular among intraday traders.
  • This candle at the top of an uptrend shows that bulls are getting weaker and unable to close the price higher.
  • Still, we went beyond that and actually combined two different patterns to develop a comprehensive market view.
  • The power of trend reversal of both technical tools candlestick pattern and supply zone will combine, and a solid bearish trend reversal signal will form.
  • The second candle opens at a lower price than the closing of the first one.

Candlestick charts are useful for technical day traders to identify patterns and make trading decisions. The Three Black Crows is a bearish reversal pattern; when this pattern appears in an uptrend, the trend reversal from up to down. The Hanging man candlestick pattern indicates a reversal in the ongoing uptrend means the uptrend will change from up to down. The price must be in an uptrend before the hanging man candlestick forms.

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