Piercing Pattern

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.

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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 >>
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    Learn how outside days provide traders with an opportunity to enter a market with a limited risk level and the opportunity ... Read Answer >>
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