Piercing is a bullish candlestick pattern that appears after a downtrend, signaling potential reversal as buyers push the price above the midpoint of the previous candle.
What Is the Piercing Line Candlestick Pattern?
The Piercing Pattern is a two-candle bullish reversal setup that shows up after a downtrend. You get a strong bearish candle, then a bullish candle that opens below the prior close and closes above the midpoint of that first candle’s real body.
That “pierce” into the prior sell candle is the tell. Sellers look in control at first, then buyers step in hard and force a close back into the range. Across 4,120 markets, this pattern shows a 72.9% confirmation rate (confirmation meaning the reversal follows through within the next few candles, not that every trade is profitable).
Where Did the Piercing Line Pattern Come From?
The piercing line comes out of 18th-century Japanese rice trading, where Osaka merchants built the early framework for candlestick charting. The idea is the same today: spot when a selloff is losing steam and buyers are willing to pay up.
That’s why you still see it used in US equities, EUR/USD, WTI crude, and crypto majors.
Why Is the Piercing Line Important in Technical Analysis?
Flags a potential buy-the-dip reversal inside a clean downtrend
Helps mark inflection points, especially near support
Works on multiple timeframes (5m, 1h, daily, weekly), though higher timeframes tend to be cleaner
Shows up across equities, FX, commodities, and crypto
Fits naturally into standard candlestick + trend + volume workflows
Piercing Line vs Hammer vs Morning Star: What’s the Difference?
What makes the piercing line useful is the specific reclaim: the second candle has to close through 50%+ of the prior body. A hammer is more about wick rejection, and a morning star needs three candles to tell the story.
A marubozu screams momentum, but it doesn’t automatically imply “reversal.” The piercing line is basically a two-session tug-of-war where buyers win the second round in a meaningful way.
How Do You Trade the Piercing Line Pattern?
Best Entry Signals for the Piercing Line Pattern
You’ve basically got two ways to play it. The conservative entry waits for the next candle to trade and close above the second candle’s high. That cuts down on fakeouts, but you’ll miss some V-reversals.
The aggressive entry takes the close of the second candle or triggers on a break of its high, which gets you in earlier but demands tighter discipline.
LuxAlgo’s sample across 4,120 markets shows 72.9% confirmation, while Bulkowski reports ~64%. Treat those as “does it follow through soon?” stats, not a profit guarantee. Your P&L still comes down to entries, stops, and where you’re taking profits.
For confirmation, the cleanest add-ons are simple: RSI under 30, Stoch under 20, or a MACD bullish cross. A volume pop helps too—think 2–3x average volume in stocks, or a clear tick-volume surge in FX futures / CFDs.
Where to Put a Stop Loss for the Piercing Line Pattern
The invalidation is straightforward: stop goes below the pattern low (usually the second candle’s low). If price takes that out, the “buyers took control” story is wrong.
Size the trade off the stop distance. Keep risk per trade around 1–2% of account equity. The pattern can be right and still chop you out, so the only real protection is position sizing and consistency.
How to Set Take-Profit Targets for Piercing Line Trades
Resistance targets: prior swing highs, a breakdown level that can flip to resistance, or a round number (like 1.0500 on EUR/USD or $100 on a large-cap stock)
Measured move: take the height of the two-candle structure and project it from the second candle’s close
Trailing stop: ATR-based or structure-based trails work well if the reversal turns into a trend leg
Indicator exit: RSI pushing into 70+ or momentum rolling over can be a decent “take some off” trigger
Best Indicators to Confirm a Piercing Line Signal
Indicator | Confirmation Signal | How It Helps |
|---|---|---|
RSI | Below 30 | Shows stretched selling / oversold pressure |
MACD | Bullish crossover | Momentum shifting back up |
Moving Averages | Reclaiming 20/50 MA | Adds structure and trend alignment |
Volume | 2–3x average | Stronger participation behind the reversal |
Stochastic | Below 20 | Supports the “selloff is stretched” read |
It also helps to line it up with other candlestick signals or broader structure like a falling wedge or a liquidity sweep. Don’t treat any single candle pattern as a standalone system.
Track your trades too—instrument, timeframe, volume conditions, and whether you waited for confirmation—because the edge often varies between something like Apple stock and a thin small-cap, or between GBP/JPY and EUR/CHF.
How Do You Spot a Piercing Line Pattern?
What Does the Two-Candle Piercing Line Look Like?
First candle (bearish): A solid red/black candle that continues the down move. Ideally it’s not a tiny doji—there should be real selling pressure, with the close leaning toward the low.
Second candle (bullish): It opens below the prior close (a gap down in markets that gap; in FX it’s often just a lower open) and then rallies to close above the midpoint of the first candle’s body. That close is the whole point—it shows buyers didn’t just bounce it, they reclaimed a meaningful chunk of the prior sell candle.
Piercing Line Rules: What Makes the Pattern Valid?
Downtrend first: You want lower highs and lower lows leading into it. No downtrend, no “reversal” story.
50% penetration: The second candle’s close must be above the midpoint of the first candle’s real body. Less than that and it’s usually just noise.
Lower open: The second candle opens below the prior close, showing early weakness before the bid takes over.
Strong finish: The closer it finishes to its high, the more it looks like real demand instead of a dead-cat bounce.
How Do You Tell Piercing Line From Similar Candlestick Patterns?
Pattern | Number of Candles | Key Characteristic | Strength |
|---|---|---|---|
Piercing Line | 2 | Lower open + close above 50% of prior body | Moderate |
Morning Star | 3 | Middle candle shows stall/indecision | Strong |
Hammer | 1 | Long lower wick, small body | Moderate |
Dark Cloud Cover | 2 | Bearish version in an uptrend | Moderate |
Dark Cloud Cover is basically the mirror image, but it shows up after an uptrend and leans bearish. A piercing line also isn’t the same as a bullish engulfing—you don’t need to fully engulf the prior body.
You just need that clean close through the midpoint that tells you the sell pressure got absorbed.
When Does the Piercing Line Pattern Work Best?
Why a Downtrend Matters for the Piercing Line Pattern
The piercing line is a downtrend reversal signal. If price is chopping sideways or grinding higher, it loses most of its edge and turns into “two candles doing stuff.” Clean structure matters here: lower highs, lower lows, and ideally price stretched away from a short moving average.
Does the Piercing Line Work Better at Support?
This pattern is more trustworthy when it prints into a real support zone: prior swing lows, a weekly level, a round number, or a high-volume node if you use volume profile.
The psychology is straightforward. The second candle opens weak (bears look like they’ve got more), then buyers step in and push price back into the prior candle’s body. That’s often what a shift looks like when selling is getting exhausted and dip buyers start leaning in.
How to Confirm a Piercing Line With Volume and Momentum
Volume considerations:
Higher volume on the second candle is a big plus
As a rough filter, ~150% of average volume improves the signal quality
High volume helps confirm the move isn’t just a thin bounce
Low volume reversals tend to fail more, especially in bear phases
Momentum indicators:
Oversold reads like RSI < 30 or Stoch < 20 help, because you’re not trying to catch a falling knife in the middle of nowhere
A bullish MACD crossover adds weight if it lines up with the candle signal
Confluence is the goal: trend + level + candle + momentum
The headline number is a 72.9% confirmation rating, but the real improvement usually comes from stacking conditions: downtrend into support, strong second-candle volume, and an oversold momentum backdrop.
Piercing Line Pros and Cons: How Reliable Is It?
Piercing Line Advantages: When It’s Useful
Easy to spot: two candles, clear rules, no fancy math
Works across markets: S&P 500 names, forex pairs, commodities, Bitcoin—same idea
Usable on multiple timeframes: but it’s generally cleaner on daily/weekly than on noisy 1–5 minute charts
Decent reliability with filters: roughly 64–80% confirmation depending on study and confirmation rules (LuxAlgo, ATAS, Bulkowski)
Can catch early turns: often shows up near the start of a bounce leg
Plays well with tools: support/resistance, moving averages, RSI/MACD, and volume all plug in naturally
Piercing Line Limitations: Common Failure Cases
Needs confirmation: trading it raw is asking for whipsaws
Chop kills it: ranging markets produce a lot of “almost” reversals
Hard bear trends can steamroll it: you’ll get bounces that fail and roll into new lows
Volume matters: low participation reversals are easier to fade
Some subjectivity: what counts as a downtrend or “clean” penetration can vary trader to trader
Not a full strategy: you still need levels, risk rules, and a realistic exit plan
Use it as a probability tool, not a prediction. When it’s wrong, it’s usually wrong fast—so your stop and sizing do the heavy lifting.
Piercing Line Pattern Summary: Key Rules and Best Practices
Piercing Line Pattern Key Takeaways
The piercing line is a solid two-candle reversal signal with a reported 72.9% confirmation rate in large-sample testing. What matters most:
Requirements: downtrend first, lower open on candle two, and a close above 50% of candle one’s body
Location: works best into real support, not random mid-range prints
Confirmation: RSI/MACD + volume filters push it into the higher-quality bucket
Risk: stop under the pattern low, size the position so the loss is survivable
Versatility: applies to stocks, forex, and futures—just adjust for gaps and liquidity
Piercing Line Trading Checklist: Do’s and Don’ts
Do's:
Wait for confirmation if the market is choppy or the level is questionable
Stack confluence: support + volume + oversold momentum beats “pattern-only” trading
Size off the stop, keeping risk around 1–2% per trade
Respect levels: take targets into resistance, not into empty hope
Replay and journal the setup on your main instruments (SPY, AAPL, EUR/USD, NQ, CL) to see where it actually works for you
Don'ts:
Don’t trade it in isolation without any context or confirmation
Don’t force it in ranges where reversals mean nothing
Don’t ignore volume when volume is part of the story
Don’t skip the stop, even if the candle looks perfect
Don’t expect perfection: a 64–80% confirmation range still leaves plenty of losers
How to Use the Piercing Line in a Full Trading Plan
The piercing line is strongest when it’s one piece of a bigger read—trend structure, key levels, momentum, and participation. Pairing it with other candlestick patterns like marubozu can help, but the real edge usually comes from where it forms and how price behaves after.
Log every trade and tag the conditions (timeframe, support quality, volume, RSI state, confirmation entry vs aggressive entry). That’s how you figure out whether the piercing line is a real weapon on your watchlist or just a nice-looking candle combo.
Used with confirmation and tight risk, it’s a practical reversal tool—old-school Japanese price action that still shows up in modern order flow.
Piercing Line Examples and Backtest Results
Piercing Line Trade Examples in Stocks and Forex
Stock market example: A trader watches XYZ slide from $50 to $35 into a known demand zone. The first candle closes at $34.50. The next candle opens at $33.80, then rips to $35.75, pushing well beyond the midpoint of the prior body. After a confirmation push, the trader enters around $36.00, sets the stop under $33.50, and targets $38.50 near prior supply. That’s a clean structure trade: defined invalidation, defined target, and room for a solid R multiple.
Forex example: EUR/USD prints a piercing line into 1.0500 support on a 15-minute chart. Tick volume expands on the bullish candle, RSI lifts from below 30, and MACD flips bullish. The day trader takes the break of the pattern high, uses a tight 30-pip stop, and targets 1.0550 into the next intraday resistance pocket.
Day trading scenario: On a 5-minute chart during the New York open, you’ll sometimes get a piercing line right after a liquidity flush. If volume is 2–3x the recent average and the level is real, it can pop hard. You still have to manage it like an intraday trade: tighter stops, quicker partials, and less patience than a swing setup.
Piercing Line Backtesting: What Do the Stats Say?
LuxAlgo’s study across 4,120 markets reports a 72.9% confirmation rate. Bulkowski ranks it 21st out of 103 patterns with about 64% accuracy, and ATAS cites roughly 64–80% with proper validation.
Key detail: these numbers are about follow-through within 2–4 candles, not your net profitability after slippage, spreads, and bad exits. Higher timeframes generally behave better, and the best performers are the ones printing into support with strong second-candle participation.
If you wait for more confirmation, your win rate usually improves—but you’ll get fewer trades and sometimes worse entry prices. That trade-off is normal.
How Do You Turn Piercing Line Signals Into Measurable Improvement Over Time?
The piercing line becomes more useful when you treat it as a testable setup rather than a one-off signal. Since the pattern’s edge changes with context (support quality, timeframe, volume, and whether you waited for confirmation), the practical next step is to review every occurrence and measure what actually worked in your market. A trading journal helps you log entries, stops, and exits alongside tags like “RSI < 30,” “2–3x volume,” or “printed into weekly support,” then compare outcomes across instruments and sessions.
Over time, that process turns general rules—like stopping below the pattern low or targeting resistance—into personalized metrics: average R multiple, win rate by filter, and how often aggressive entries outperform conservative ones. Using a structured tracker such as Rizetrade trading journal analytics dashboard for tracking PnL, pattern tags, and performance statistics can make those reviews consistent, so your decisions are based on evidence from your own trades rather than confirmation-rate headlines.