Piercing Pattern Candlestick Explained: How to Trade It - Step-By-Step Guide

Jasper Osita - Market Analyst

2025-07-02 13:15:05

Goal of This Lesson

To master the Piercing Pattern candlestick formation, learn what it is, how it works, how it compares to the Bullish Engulfing Pattern, and when to use it as a high-probability trade signal in real-world price action.

Real-Life Analogy

Picture this: a heavy rainstorm has been pouring all afternoon. You’re soaked, the sky is grey, and everything feels gloomy. Suddenly, a powerful ray of sunlight pierces through the clouds, lighting up the horizon. It doesn’t end the storm, but it signals change.

That’s the Piercing Pattern: the first glimpse of strength from buyers in a bearish environment.

What is a Piercing Pattern?

The Piercing Pattern is a two-candle bullish reversal signal that occurs after a downtrend or bearish sequence. It consists of:

Candle 1: A large red (bearish) candle

Candle 2: A green (bullish) candle that opens below the prior low but closes more than halfway into the red candle’s body

This pattern shows that buyers stepped in with force, reclaiming more than 50% of the bearish ground lost previously.

Piercing Pattern vs Bullish Engulfing: What’s the Difference?

Feature	Piercing Pattern	Bullish Engulfing
Second candle opens	Below prior low	Below prior low
Second candle closes	Above 50% of red body	Above full red body (fully engulfs)
Signal strength	Strong but moderate	Stronger reversal signal
Ideal context	End of down move, just after liquidity grab or into demand	Sharp reversal, typically stronger reaction needed
Symbolism	Buyer confidence reclaims control	Buyer dominance over entire session

The Piercing Pattern is a sign of aggressive buying, but unlike Engulfing, it doesn’t fully erase the red candle - it overlaps halfway, signaling intent rather than full domination.

Why the Piercing Pattern Works

The pattern works due to a psychological power shift:
Bears start strong and push to new lows
Bulls step in unexpectedly and drive the price back up past the midpoint
This catches late sellers offside and invites buyers who missed the initial rally
It becomes a setup for a bullish reversal or intraday recovery

Where & When It Works Best

Look for the Piercing Pattern at:

Demand zones on the H1 or Daily timeframe
After liquidity sweeps below previous session/day/week low
At session opens (London/NY) for intraday reversal setups
Oversold conditions based on RSI or volume exhaustion
Previous key swing highs/lows
Support/Resistance levels
Premium/Discount levels + Fibonacci

Key Levels are the “Key” in trading the Piercing Pattern

Trading Strategy: 2-Step How to Trade the Piercing Pattern

Step 1: Top-Down Confirmation

H1/Daily: Price nearing a higher-timeframe key level
Wait for Piercing Pattern to Form
Confirm the second candle closes above 50% of the red candle’s body

Step 2: Lower Timeframe Breakout

Piercing Pattern Sample 1

Piercing Pattern Sample 2

Wait for a short consolidation to frame entry
Stack up confluences to confirm trade idea
Fibonacci
Engulfing + Other Candlestick Pattern
Execute at Close after the Breakout

Stop-loss: Below pattern’s low

Target: Next key level, 2R-3R

Do’s and Don’ts of Trading the Piercing Pattern

Do’s:

Wait for the candle to close above 50%—never jump in early
Combine with other concepts: sweeps, FVGs, OBs, Fibonacci levels, support/resistances
Use in areas of higher timeframe importance
Wait for a lower timeframe breakout

Don’ts:

Don’t trade the pattern in isolation—use confluence
Don’t assume every Piercing Pattern = full trend reversal
Don’t ignore the broader context or countertrend setups
Don’t force it in the middle of a balanced range or chop

Pro Tip: If the Piercing Pattern shows up after a news-driven selloff, or into a key economic level, it often becomes a trap reversal - ideal for fade trades when institutions step in.

Final Thought: It’s Not Just a Pattern - It’s a Power Shift

The Piercing Pattern isn’t just about shapes - it’s about potential momentum shift. When it shows up with volume, structure break, and context, it’s a loud signal: “Buyers are ready to reclaim control.”

While the Bullish Engulfing shouts domination, the Piercing Pattern whispers a comeback, and that whisper is often more actionable when paired with Smart Money Concepts.

"Trade context, not just the candlesticks. The real edge is knowing where the trap is set and who’s about to get caught."

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This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplies by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.

Yazar

Jasper has been in the markets since 2019 trading currencies, indices and commodities like Gold. His approach in the market is heavily accompanied by technical analysis and of course, supported by fundamentals. He has a background in trading proprietary firms and has been teaching students how to navigate themselves in the markets from basic to advance concepts.

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Piercing Pattern Candlestick Explained: How to Trade It - Step-By-Step Guide

Goal of This Lesson

Real-Life Analogy

What is a Piercing Pattern?

Piercing Pattern vs Bullish Engulfing: What’s the Difference?

Why the Piercing Pattern Works

Where & When It Works Best

Trading Strategy: 2-Step How to Trade the Piercing Pattern

Step 1: Top-Down Confirmation

Step 2: Lower Timeframe Breakout

Piercing Pattern Sample 1

Piercing Pattern Sample 2

Do’s and Don’ts of Trading the Piercing Pattern

Do’s:

Don’ts:

Final Thought: It’s Not Just a Pattern - It’s a Power Shift

Check Out My Contents

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