Piercing Pattern Candle Pattern
My book, Encyclopedia of Candlestick Charts
, pictured on the left, takes an in-depth look at candlesticks, including performance statistics.
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Piercing Pattern Candlestick: 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. |  Piercing Pattern |
Piercing Pattern Candlestick: 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 Candlestick: Three Trading Tidbits
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.
- Piercing pattern candles that appear within a third of the yearly low perform best — page 619.
- Select tall candles for the best performance — page 619.
- Avoid trading piercing patterns when the primary trend is downward — page 620-621.
Piercing Pattern Candlestick: Example
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.
