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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Bulkowski’s Piercing Pattern

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Busted
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 07/20/2017
21,612 -28.97 -0.1%
9,483 -92.64 -1.0%
720 5.10 0.7%
6,390 4.96 0.1%
2,473 -0.38 0.0%
YTD
9.4%
4.9%
9.1%
18.7%
10.5%
Tom's Targets    Overview: 07/14/2017
21,850 or 21,000 by 08/01/2017
9,950 or 9,400 by 08/01/2017
725 or 685 by 08/01/2017
6,450 or 6,175 by 08/01/2017
2,525 or 2,400 by 08/01/2017

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

My book, Encyclopedia of Candlestick ChartsEncyclopedia of Candlestick Charts book., pictured on the left, takes an in-depth look at candlesticks, including performance statistics.

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The piercing pattern acts in theory as it does in reality, as a bullish reversal, ranking 21 out of 103 candlestick patterns where 1 is best. Overall performance is good, too, suggesting the price trend after the breakout is a lasting and profitable one. The piercing pattern does best in a bear market, especially after a downward breakout. Upward breakouts in a bull market are the weakest of the four combinations of bull/bear market and up/down breakout direction.

Piercing Pattern Important Results

Theoretical performance: Bullish reversal
Tested performance: Bullish reversal 64% of the time
Frequency rank: 40
Overall performance rank: 13
Best percentage meeting price target: 67% (bull market, up breakout)
Best average move in 10 days: -6.57% (bear market, down breakout)
Best 10-day performance rank: 13 (bear market, down breakout)

All ranks are out of 103 candlestick patterns with the top performer ranking 1. "Best" means the highest rated of the four combinations of bull/bear market, up/down breakouts.

The above numbers are based on hundreds of perfect trades. See the glossary for definitions.

The ideal piercing pattern candlestick
Piercing Pattern
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Piercing Pattern Discussion

The theoretical performance of the piercing pattern candlestick is as a bullish reversal and testing found that it acts that way 64% of the time. That is quite good. Better yet, the overall performance ranks 13th out of 103 candles. That is wonderful and with a frequency rank of 40, you should be able to spot it often in a historical price series or real time.

The best average move 10 days after the breakout is a drop of 6.57% in a bear market. I consider moves 6% or larger to be good ones, so this candlestick does well. The performance rank is 13, which is near the top of the list, too.

Piercing Pattern Identification Guidelines

CharacteristicDiscussion
Number of candle linesTwo.
Price trend leading to the patternDownward.
ConfigurationLook for a black candle followed by a white one that opens below the black candle’s low and closes between the midpoint of the black body and opening price.
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Three Trading Tidbits for Piercing Pattern

If you want a few bones from my Encyclopedia of candlestick charts book, here are three to chew on. The pages refer to the book where the tips appear.

  1. Piercing pattern candles that appear within a third of the yearly low perform best -- page 619.
  2. Select tall candles for the best performance -- page 619.
  3. Avoid trading piercing patterns when the primary trend is downward -- page 620-621.

Piercing Pattern Example

The piercing pattern candlestick on the daily scale

The daily chart shows two piercing patterns circled in red. Both appear in a brief downward retrace of the primary upward price trend. Both act as reversals.

The first candle is black and the second is white. The white candle opens lower, but closes above the mid point of the black body and below the open.

It is difficult to tell from the chart if candle A shows an upward breakout or not. Candle B certainly does when price closes above the top of the candle pattern the next day. The upward trend resumes after that.

The chart patterns shown here reminds me of a simple ABC correction. Price moves in an uptrend then reverses to a down-up-down jog that is the ABC.

-- Thomas Bulkowski

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See Also

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. I'll give you an honest answer. That was a stupid question!