Piercing | RizeTrade

What is the Piercing Candlestick Pattern?

The Piercing Pattern is a two-candle bullish reversal pattern that appears after a downtrend, signaling potential buying pressure and a reversal to the upside. It forms when the first candle is bearish and followed by a bullish candle that opens below the previous close but closes above the midpoint of the previous bearish candle’s body.

This structure suggests that sellers were in control initially, but buyers stepped in strongly during the second session—often marking the end of downward momentum.

🔑 Key Takeaways

 📉 The Piercing Pattern signals a potential bullish reversal composed of two candles.
 🕯️ The first candle is long and bearish, while the second opens lower and closes above the midpoint of the previous candle.
 ✅ It’s most reliable when it forms at key support levels, Fibonacci retracements, or after a sustained downtrend.
 🎯 Confirmation occurs when a third candle closes higher, showing strong buyer momentum.
 💪 The optimal entry point is just above the high of the second candle.

⚡ How Reliable Is the Piercing Pattern Candlestick?

The Piercing Pattern is often viewed as an early sign of bullish reversal — but how consistent is its performance across markets?

🧪 Our Internal Testing

Statement:
We conducted a full-scale backtest using our Candlestick Pattern Performance Matrix to measure the Piercing Pattern’s effectiveness under varying market conditions.

Evidence:

• 2,418 Piercing Pattern instances tested

• Markets: stocks, forex pairs, and crypto

• Timeframes: 4H, Daily, Weekly, and Monthly

• Tested across both trending and range-bound environments

Insight:
The pattern showed strong performance in oversold markets and near key support levels, but less reliability in neutral or mid-trend conditions. Its strength lies in signaling potential short-term reversals following extended declines.

📈 Key Findings

Statement:
We compared the Piercing Pattern’s standalone accuracy to results when paired with basic confirmation tools.

Evidence:

Insight:
👉 The Piercing Pattern alone offers moderate reliability, but accuracy improves notably when volume strength or RSI divergence confirms the reversal.
For ongoing refinement, traders can analyze their trade outcomes to see how confirmation strength impacts reversal consistency.

📈 How to Trade the Bullish Piercing Pattern?

This two-candle reversal pattern signals that buyers are stepping back in after a strong downtrend — often marking the start of a potential upside recovery.

🔍 Entry

Confirm a clear downtrend before spotting the Bullish Piercing Pattern:
1️⃣ A long bearish candle, followed by
2️⃣ A bullish candle that opens below the prior low but closes above the midpoint of the first candle’s body.
Enter long once price breaks above the second candle’s high, confirming sustained buying momentum.

🛡️ Stop-Loss

Set your stop below the low of the second candle, which represents the pattern’s structural support.
Keep your risk per trade under 2% and size positions according to your stop distance.

🎯 Target

For conservative trades, target the nearest resistance or previous swing high.
Aggressive traders can aim for Fibonacci extensions (1.272 or 1.618) or trail stops with a short-term moving average to capture extended runs.
Maintain at least a 2:1 reward-to-risk ratio for consistent trade performance.

Trading Strategies that Use the Piercing Pattern

Piercing Pattern with RSI Divergence

Concept
This strategy combines the Piercing Pattern with momentum divergence to catch early signs of bullish reversals at strong support levels.

Setup
Identify a Piercing Pattern forming near key support after a clear downtrend.
Confirm RSI divergence — the RSI forms higher lows while price makes lower lows, showing momentum recovery.

Long Setup
Enter long when price breaks above the second candle’s high.
Set a stop-loss below the pattern’s low.

Risk Management & Exit
Target the previous resistance zone or use a 2:1 reward-to-risk ratio.
This setup performs best on the 4H and Daily timeframes.

What Gives It an Edge
RSI divergence confirms waning bearish pressure, and the Piercing Pattern marks bullish entry confirmation with strong follow-through potential.

Piercing Pattern with Moving Average Confirmation

Concept
This approach uses moving averages as a trend filter, confirming when a Piercing Pattern leads to a legitimate reversal instead of a short-term bounce.

Setup
Wait for a Piercing Pattern forming below the 20 EMA during a downtrend.
Once price closes above the EMA, it confirms bullish strength.

Long Setup
Enter long on the close above the EMA.
Place the stop-loss below the pattern’s low.

Risk Management & Exit
Target the 50 EMA or nearby resistance zone.
Look for a volume spike during confirmation for added conviction.

What Gives It an Edge
Using the 20 EMA filters for trend alignment and prevents premature entries before momentum turns upward.

Piercing Pattern with Volume Spike Strategy

Concept
Volume expansion provides essential confirmation of buyer participation and strengthens the reliability of the Piercing Pattern.

Setup
Spot a Piercing Pattern following a strong selloff.
Confirm that the second bullish candle forms with rising or above-average volume.

Long Setup
Enter long once price closes above the second candle’s high.
Set a stop-loss below the pattern’s low.

Risk Management & Exit
Exit at the next resistance or use a trailing stop to capture extended gains.

What Gives It an Edge
Volume spikes validate institutional buying, confirming that the reversal is supported by real participation, not just short covering.

Real Trading Example of the Piercing Pattern (AMD)

Context
After a steady decline from $130 to $118, AMD formed a large bearish candle followed by a strong bullish candle that opened at $117 (below the prior close) and closed at $122, surpassing the midpoint of the previous candle — a textbook Piercing Pattern.

Trade Setup

• Entry: $122.50 (above second candle’s high)

• Stop-Loss: $116.50 (below pattern low)

• Target: $128 (previous swing resistance)

Result
Within three sessions, AMD rallied to $127, delivering a 2:1 reward-to-risk trade, confirming the reversal signal.

Best Indicators to Combine with the Piercing Pattern

Common Mistakes and How to Avoid Them

Recognizing Failure Signals
Avoid trading if the second candle fails to close above the midpoint of the first — it invalidates the pattern.
Be cautious during strong bearish markets, where rallies may fade quickly.
Never trade against high-volume downtrends without additional confirmation.

Tips for Trading the Piercing Pattern

• Always confirm with momentum (RSI or MACD) or volume before entering.

• Focus on setups that form near support or Fibonacci retracement levels (61.8%).

• Wait for candle close confirmation to avoid premature entries.

• Apply consistent risk management and avoid over-leveraging during volatile reversals.

🔍 Piercing Pattern vs. Bullish Engulfing: Which Delivers the Stronger Reversal Signal?

Both Piercing and Bullish Engulfing patterns are two-candle bullish reversals — yet their reliability and structure reveal clear differences in strength.

🧪 Internal Testing Overview

Statement:
We tested the Piercing Pattern and Bullish Engulfing Pattern across multiple markets to compare reversal performance under identical conditions.

Evidence:

• Dataset: 2,050 pattern occurrences across Forex, indices, and crypto

• Timeframes: 1H, 4H, and Daily

• Market context: Downtrend reversals only

• Test validation: A reversal was confirmed if price closed 1.5× ATR above the pattern’s high within the next three candles

Results Summary

💡 Insight

The Bullish Engulfing pattern showed a stronger and more decisive shift in market control — often leading to faster recoveries following a downtrend.
Meanwhile, the Piercing Pattern tended to trigger earlier but required additional confirmation, such as a trend filter or momentum uptick, to achieve consistent results.

Traders can improve timing and pattern selection by analyzing their historical trade performance to see how each setup aligns with their strategy’s risk profile.