Definition: Get the highest rated stock from Americanbulls for this pattern >>>
Bullish Piercing Line Pattern is a bottom reversal
pattern. A long black candlestick is followed by a gap
lower during the next day while the market is in downtrend.
The day ends up as a strong white candlestick, which
closes more than halfway into the prior black candlestick’s
real body.
Recognition Criteria:
1. Market is characterized by downtrend.
2. We see a long black candlestick.
3. Then we see a long white candlestick whose opening
price is below previous day’s low on the second
day.
4. The second day’s close is contained within the
first day body and it is also above the midpoint of the
first day’s body.
5. The second day however fails to close above the body
of the first day.
Explanation:
The market moves down in a downtrend. The first black
real body reinforces this view. The next day the market
opens lower via a gap. Everything now goes, as bears
want it. However suddenly the market surges toward the
close, leading the prices to close sharply above the
previous day close. Now the bears are losing their confidence
and reevaluating their short positions. The potential
buyers start thinking that new lows may not hold and
perhaps it is time to take long positions.
Important Factors:
In the Bullish Piercing Pattern, the greater the degree
of penetration into the black real body, the more likely
it will be a bottom reversal. An ideal piercing pattern
will have a real white body that pushes more than half
way into the prior session’s black real body.
A confirmation of the trend reversal by a white candlestick,
a large gap up or by a higher close on the next trading
day is suggested.
