DEFINITION of 'Piercing Pattern'

A technical trading signal that is marked by a closing down day with a good-sized trading range, followed by a trading gap (drop) lower the following day that covers at least half of the upward length of the previous day's real body (the range between the opening and closing prices), and then closes up for the day. A piercing pattern often signals the end of a small to moderate downward trend.

BREAKING DOWN 'Piercing Pattern'

A piercing pattern can serve as an indicator that it is time to either buy a stock or close out short positions because the stock may be trending upward soon. It should not, however, be used as a stand-alone indicator, but should be compared against other bullish and bearish indicators.

RELATED TERMS
  1. Mat Hold Pattern

    A pattern found in the technical analysis of stocks that ultimately ...
  2. Today's High

    A security's intraday high trading price. Today's high is the ...
  3. Upside Gap Two Crows

    A bearish market reversal signal in technical analysis. The upside ...
  4. Gap Risk

    The risk that an investment's price will change from one level ...
  5. Bullish Homing Pigeon

    A trend indicated by a large candlestick followed by a much smaller ...
  6. Previous Close

    A security's closing price on the preceding day of trading. Previous ...
Related Articles
  1. Trading

    Candlestick Charting: Perfecting The Art

    Take a look at continuation patterns and how they can confirm or deny trends.
  2. Investing

    Find Turning Points With Single-Day Patterns

    On their own, single-day patterns can be unreliable, but that doesn't mean they can't be used effectively.
  3. Trading

    Using Bullish Candlestick Patterns To Buy Stocks

    These five popular candlestick chart patterns signal a bullish reversal in downtrend.
  4. Trading

    Introduction to Options Types

    Options are often the bread and butter of day traders. Here are some of the more common types of options.
  5. Investing

    Gap Strategies To Try For Intraday Trades

    Many traders lack effective strategies to manage gaps, whether they pop up on open positions or mark the first play of the day. These strategies may help.
  6. Trading

    Playing The Gap

    Learn how you can earn money by analyzing the disruptions in normal price patterns.
  7. Trading

    Candlestick Charting: What Is It?

    Discover the components and basic patterns of this ancient technical analysis technique.
RELATED FAQS
  1. How do I build a profitable strategy when spotting a Piercing pattern?

    Learn a simple and potentially very profitable investing strategy that can be utilized when a trader identifies a piercing ... Read Answer >>
  2. How are Piercing patterns interpreted by analysts and traders?

    Understand the candlestick piercing pattern and the common interpretation of market reversal assigned by traders and market ... Read Answer >>
  3. How effective is creating trade entries after spotting a Piercing pattern?

    Learn how to identify the candlestick piercing pattern and understand why it is considered a reliable technical indicator ... Read Answer >>
  4. How do I implement a forex strategy when spotting a Piercing Pattern?

    Learn a forex trading strategy that can be implemented when a trader recognizes a piercing pattern candlestick formation ... Read Answer >>
  5. What are the most common Bullish patterns used by traders?

    Learn about some of the most commonly recognized bullish candlestick chart patterns that traders use to identify market turning ... Read Answer >>
  6. How effective is creating trade entries when using Outside Days?

    Learn how outside days provide traders with an opportunity to enter a market with a limited risk level and the opportunity ... Read Answer >>
Hot Definitions
  1. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct ...
  2. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  3. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  4. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  5. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  6. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
Trading Center