A technical trading signal that is marked by a closing down day with a good-sized trading range, followed by a trading gap lower the following day that covers at least half of the upward length of the previous day's real body , and then closes up for the day. A piercing pattern often signals the end of a small to moderate downward trend.
A piercing pattern can serve as an indicator that it is time to either buy a stock or close out short positions because the stock may be trending upward soon. It should not, however, be used as a stand-alone indicator, but should be compared against other bullish and bearish indicators.
