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Some candlestick price patterns are well known like shooting stars, hammer reversal bars, and engulfing bars. However, some of the less well-known candlestick price patterns are worth noting for reading price charts. This is particularly helpful when you are managing a position on the longer-term charts. Two patterns we are discussing today and tomorrow are the piercing pattern and the dark cloud cover. So, first, let’s look at the piercing pattern for today with an example of how this looks from Apple’s price charts.
 

The piercing pattern described

The piercing pattern is a candlestick pattern used in trading to show that a downtrend might be ending and the price could start going up. It has two candlesticks. It is particularly useful when assessing whether a downtrend is about to come to an end. The pattern is subtle and easily overlooked, so this is what to specifically look for. Note the gap that is needed for the second candlestick pattern.

• Candlestick 1: The first candlestick in the pattern is a bearish candlestick, indicating selling pressure. It represents a continuation of the existing downtrend and opens near or above the previous candlestick's close
• Candlestick 2: The second candlestick is a bullish candlestick, which opens lower than the previous candlestick's close. Note: There is a price gap between the close of the first candlestick and the opening of the second candlestick. So, intraday it would look like the bears are taking prices to even lower lows. However, the tide changes with the second candlestick.
• Close of Second Candlestick: The crucial aspect of the piercing pattern comes with the second candlestick as it must close at least halfway into the real body of the first candlestick. In other words, the second candlestick's closing price is significantly higher than the first candlestick's midpoint.
   

The piercing pattern on the charts

Take a look here for a market example of what candlestick 1 and candlestick 2 from the Apple Weekly chart should look like.

(Click on image to enlarge)

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