Japanese candlesticks - Piercing line
Definition: A piercing line structure is comprised of two Japanese candlesticks. The first is a large bearish candlestick (red) followed by a large bullish candlestick (green). The second candlestick opens in a bearish gap and its closing occurs on or above the mid-point of the first candlestick.
Characteristic: A piercing line structure often forms after a significant drop characterized by several large red Japanese candlesticks.
Significance: A piercing line is a reversal pattern, it indicates a reversal in the bullish trend. This reflects exhaustion of selling power and a gradual takeover by the buyers.
Note: The higher the second candlestick closes above the midpoint of the first candlestick, the more reliable the piercing line structure is.
Invalidation: If the next candlestick is not bullish, the piercing line structure is invalidated.