Two candle, bullish reversal

Piercing Line

The Piercing Line is a two-candle bullish reversal pattern. A bearish candle is followed by a bullish candle that opens below the prior low but closes above the prior midpoint. Weaker than Bullish Engulfing.

Bullish

Bias

Moderate (weaker than Bullish Engulfing)

Reliability

Downtrend bottom + horizontal support

Best context

4H, Daily, Weekly

Timeframe

What is the Piercing Line?

The Piercing Line appears at the bottom of a downtrend. Two candles:

Candle 1: A long bearish candle continuing the downtrend. Candle 2: Opens below Candle 1's low (gap down or, in 24-hour markets, open below Candle 1's close). Then rallies aggressively to close above the midpoint of Candle 1's body.

The pattern shows sellers attempted to extend the downtrend — and were decisively rejected. Weaker than Bullish Engulfing because Candle 2 only pierces halfway through Candle 1, not all the way.

How to identify a Piercing Line

Requirements:

1. Appears at the bottom of a clear downtrend. 2. Candle 2 opens below Candle 1's low (or, in forex, below Candle 1's close). 3. Candle 2 closes above the midpoint of Candle 1's body. 4. Candle 2 does NOT fully engulf Candle 1 (that would be a Bullish Engulfing).

The deeper Candle 2 closes into Candle 1's body, the stronger the signal.

How to trade the Piercing Line

Standard entry.

Confirmation entry: Enter long at the close of Candle 2. Stop below Candle 2's low. Target previous swing high or 1.5x stop distance.

Wait-and-see: Wait for an additional bullish candle to confirm. Fewer signals, lower false-positive rate.

Piercing Lines at horizontal support with RSI bullish divergence produce tradeable long setups. Without confluence, reliability drops. Many traders prefer Bullish Engulfing or Morning Star for higher conviction.

More patterns and definitions in the forex glossary, or see them stacked on real charts in the trading blog.

Piercing Line FAQ

How is Piercing Line different from Bullish Engulfing?

Both are two-candle bullish reversals. Piercing Line closes above the midpoint of Candle 1's body. Bullish Engulfing fully covers Candle 1's body. Engulfing is the stronger variant.

Does Piercing Line require a gap down?

Traditionally yes, but in 24-hour markets like forex, gaps are rare. The relaxed forex definition requires Candle 2 to open below Candle 1's close.

How deep should Candle 2 close into Candle 1?

At least 50% (the midpoint). A deeper close (e.g. 70% of Candle 1's body) is a stronger signal. A close at exactly the midpoint is the minimum threshold.

What confirms Piercing Line?

The two-candle pattern itself is the signal. Some traders wait for an additional bullish candle; reduces false signals at the cost of reduced trade frequency.

What timeframe works best?

4H, Daily, Weekly. Daily Piercing Lines at horizontal support produce the highest-quality setups.

Mentorship · Free for life

Want my daily institutional setups?

Verified trade ideas posted live every NY session. Entry, stop, target on every idea. Free for life when you sign up with a trusted broker.

See the mentorship

Mentorship is free for life when you sign up with a trusted broker through my referral link. Read the broker partnership disclosure