Piercing Line Pattern: the partial engulfing reversal
A two-bar reversal that recovers into, but not past, the prior bar’s body — weaker by definition than a full engulfing pattern.
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Open the chartWhat it measures
A piercing line is a down bar followed by an up bar that opens below the first bar’s low (or close, on a market without true gaps) and closes above the midpoint of the first bar’s body — but not above its open.
It measures a partial recovery: buyers took back more than half of the prior bar’s move without fully reversing it — real ground regained, short of a full takeover.
How it is calculated
These are the steps Basis performs, verified against the published definition.
- 1
Bar one closes down, ideally on above-average range.
- 2
Bar two opens at or below bar one’s low.
- 3
Bar two closes above the midpoint of bar one’s body but below bar one’s open — closing above the open would make it a bullish engulfing pattern instead.
How to read it
- The deeper the close sits above the midpoint, the stronger the read; a close barely past the midpoint is a marginal case.
- It is a weaker signal than a bullish engulfing pattern by construction — the recovery was real but incomplete.
- A piercing line at a level that already mattered — a prior low, a round number — carries more weight than the identical shape appearing in open space with no structure behind it.
- The second bar’s volume matters as much as where its close lands: a strong recovery on light volume is a thinner case than the same close on volume clearly above the recent average.
Where it misleads
On a continuous market like crypto, the "gap down open" this pattern was defined around is uncommon, so most piercing-line signals here come from a weaker overlap condition than the original definition intended. Treating a marginal midpoint close as equivalent to a strong one overstates how much recovery the pattern actually shows.
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Updated 2026-08-27 · Educational reference, not financial advice.