Bullish Piercing Line Candlestick
After an established trend, day-one is a long red day
The second day is a blue candle that closes above the midpoint of the first days body.
The market continues the downtrend on the first day. By day-two buyers take price up to close near the open of the previous day.
In FX, traders view the lower the second day low the better, since the bigger the sell-off after the open the more buyers were able to drive price back up.
â€¢ Confirmation and Signal Strength
This formation suggests bulls have begun to take charge of the market, and shorts have been shaken by the sudden lost of bearish momentum. Rallying days are common after this formation as more buyers confidently to enter the market with a clear stop benchmark at the second day low.
The higher day-two closes into the first day Candlestick body, the higher the chance of the downtrend bottoming out. If the second day candle does not trade above the midpoint of the first day body, traders typically feel it safer to wait for confirmation on the third day.
Some traders wait for confirmation regardless of how deep the bullish Piercing Line penetrates the second day.
In non-FX markets, traders want to see the second day gap down, opening below the close of the previous day. Because the Forex Market offers continues 24 hour markets, such gaps are not typically possible. But FX traders will turn to the low of the second day to indicate how strong the opening sell-off is, to gauge the strength of the subsequent bull move.
The Piercing Line is the opposite of the Dark Cloud Cover.
PT. Mentari Mulia Berjangka | Broker FOREX Terpercaya« Back to Glossary Index