Piercing Pattern Candlestick Explained: How to Trade It - Step-By-Step Guide
ACY Securities - Jasper Osita
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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