Piercing Line
The Piercing Line is a two-candle bullish reversal pattern. The first candle is a strong bearish candle, and the second candle opens near or below the first candle's low and then closes above the midpoint of the first candle's body. It suggests that sellers pushed lower but buyers fought back past halfway — a sign the downtrend may be weakening.
Piercing Line candlestick pattern diagram
Pattern Anatomy
- Candle 1: A strong bearish (red) candle with a relatively large body
- Candle 2: A bullish (green) candle that opens near or below the first candle's low
- Candle 2 then closes above the midpoint of Candle 1's body
- The higher Candle 2 closes into Candle 1's body, the stronger the signal
- If Candle 2 closes above Candle 1's open entirely, it becomes a Bullish Engulfing instead
How to Interpret
- Most significant after a sustained downtrend — signals potential reversal
- Stronger when Candle 2 opens well below Candle 1's low (gap down)
- Volume confirmation: higher volume on the bullish candle adds conviction
- Best when appearing at a known support level
- The deeper the penetration past the midpoint, the stronger the signal
How Engulfy Detects the Piercing Line
- Previous candle must be bearish (Close < Open)
- Current candle must be bullish (Close > Open)
- Current candle’s Open must be near or below the previous candle’s Low
- Calculate the midpoint of the previous candle’s body: (prev.Open + prev.Close) / 2
- Current candle’s Close must be > that midpoint (closes in the upper half of the prior body)
Engulfy uses a calibrated threshold for the open rather than strictly requiring a gap below the low, accommodating modern markets where true gap-downs are less common.
Expert References
- Steve Nison, Japanese Candlestick Charting Techniques — describes the Piercing Line as the bullish counterpart to Dark Cloud Cover. The name comes from the second candle "piercing" up through the first candle's body.
- Thomas Bulkowski, Encyclopedia of Candlestick Charts — found Piercing Line patterns act as bullish reversals approximately 64% of the time
Controversy & Limitations
- The threshold for "near the low" varies by implementation — some texts require a true gap below the low
- The midpoint rule is the same arbitrary 50% as Dark Cloud Cover — why 50% and not 40% or 60%? Different sources may use slightly different thresholds
- Generally considered slightly less reliable than Bullish Engulfing because it doesn't fully engulf the prior candle's body