After a strongly bearish candle, the next candle opens lower but pierces significantly into the body of the previous candle, signalling the potential for a bullish reversal:
General Identification & Interpretation
Steve Nison is credited with bringing Japanese candlestick charting to the West. In his book "Japanese Candlestick Charting Techniques" he describes piercing patterns with the following characteristics:
Typical characteristics
First candlestick is a strong red candle
Although the second candlestick opens lower, the price rises and pierces into the body of the first candle
Examples of use as a trading indicator
Potential bullish reversal signal after a downtrend
Support level near the lows of the piercing pattern
Other interpretations
Typically, it is thought that the larger the degree of penetration into the body of the first candle, the stronger the potential for a reversal.
If the second candle pierces halfway (or less) through the body of the first candle, there are other names (on-neck, in-neck, thrusting) associated with the pattern.
More for beginners
Check out our quick start guide to candlestick charting for more information if you are new to candlestick charting!
