Piercing is a two-candle bullish reversal candlestick pattern found in a downtrend. The first candle is red and has a larger than average body. The second candle is green and opens below the low of the prior candle, creating a gap, and then closes above the midpoint of the first candle.
The pattern shows a possible shift in the momentum from the downside to the upside, indicating that a reversal might happen soon.
The bearish version of the Piercing pattern is the Dark Cloud Cover candlestick pattern.
Traditionally, this candlestick pattern is recognized in conjunction with a specific trend direction, i.e. it might be important for the pattern if the price has been generally going up or down. The ‘Detect Trend Based On’ option allows you to specify which of the following methods to use to detect the trend:
By comparing two different SMAs, the 'SMA50, SMA200' option only detects stronger trends. When the trend is weak and the condition above is not met, no patterns will be detected. In contrast, the 'SMA50' option will also detect weaker trends.