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Piercing line pattern is a candlestick trend indicating pattern, which indicate the end of downtrend and start on an uptrend. This pattern is opposite to dark cloud cover pattern. In bullish piercing line candlestick pattern, a long dark (colored) candlestick of the first day is followed by a white (clear) candlestick of the second day.

The requirements for a piercing line pattern include,

• The long dark (bearish) first day candlestick must be formed after a significant downtrend.
• The opening price of the second day white (bullish) candlestick must be below the previous days low.
• The closing price of second day candlestick must be with in, but must exceed the midpoint of first day dark candlestick.

Bullish piercing line candlestick pattern is considered as a highly reliable market reversal indicator. The idea is that, even after a lower opening (with a gap) in second day because of a significant downtrend the bulls have managed to bring the market close to (or above) the previous days closing price. The reliability of piercing line candlestick pattern increases: 1) with increase in length of both candlesticks, 2) with increase in gap between first day’s closing price and second days opening price, 3) the higher the closing price of second candle with respect to first one and 4) with the volume of trades. Many traders look for a confirmation, which can be a gap or a white candlestick in the third day.

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