Greetings, worthy readers of the financial world! It is the goal of each of us to make profits in the financial markets through comprehensive analysis and making the right trade at the right time. In order to make the accurate trades, it is necessary to use a series of effective methods and strategies. One of the methods that has proven successful in this field is the Japanese candlestick patterns commonly used in technical analysis. One of the candlestick patterns that plays a key role in trading is the Piercing Pattern, also known as the Rising Sun pattern.
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| Piercing (Rising Sun) Pattern |
- Topic: Piercing or Rising Sun
- Type: Bullish
- Trend direction: Reversal
- Opposite pattern: Dark Cloud Cover
What is a Piercing (Rising Sun) Candlestick Pattern?
A Piercing candlestick pattern, also known as the Rising Sun pattern, is one of the most popular bullish reversal patterns in candlestick trading. It helps candlestick traders spot when a downtrend might be coming to an end and a new uptrend could start. This pattern appears on the chart after a strong red candle when sellers have been in control for some time. Then, a large green candle forms and "pierces" into the red one from the previous candle. The second candle closes above the halfway point of the first, showing that buyers are gaining strength.
People who study candlestick patterns often use this formation to identify early trend reversals. Many traders who learn how to read candlesticks watch for this pattern because it can hint that the market mood is shifting from selling to buying. It can appear on different timeframes such as 15-minute, 1-hour, 4-hour, or daily charts in forex, stocks, and crypto markets, helping us plan their entry signals before the next move up.
Why is it called that?
The Piercing or Rising Sun pattern gets its name from the image it creates. After one strong red candle that shows falling prices, a green candle rises through the first candle's body, just like the sun coming out after a dark night. This move gives candlestick traders a clear visual sign that the market direction might change soon.
The name "Piercing" fits because the second candle seems to cut through the weakness of the first one. The phrase "Rising Sun" adds a more positive meaning, showing the start of new buying energy. Anyone studying candlestick trading sees this pattern as a reminder that even after a long fall, the market can turn around with the right bullish signal.
What the Piercing Candlestick Pattern Looks Like
The Piercing (Rising Sun) candlestick pattern is a bullish reversal formation that shows a bearish trend may be turning into a bullish trend. It consists of two candlesticks:
- The First Candle: A bearish candle with a long body and a small wick appears while the trend is still moving downward. The candle is usually red (or black).
- The Second Candle: A strong bullish candle forms, opening below the close of the first candle but closing above its midpoint. This shows that buyers are gaining strength and the market may start moving upward. The candle is typically green (or white).
This two-candle formation signals that selling is slowing down and buying power is returning, indicating that a bullish trend could be beginning.
How to Trade the Piercing (Rising Sun) Candlestick Pattern
The Piercing or Rising Sun candlestick pattern is a bullish reversal pattern that shows a bearish trend may be ending and prices could start moving up. When this pattern appears, it encourages buyers to enter the market, instilling hope, and helps candlestick followers find clear entry points. Candlestick traders often wait for confirmation by seeing if the next candle moves up or if the price stays above a nearby support level, which reduces the chance of a false signal.
To manage the trade and avoid common mistakes, set a stop loss below the low of the red candle, avoid entering too early, and do not chase the price after a big move. Staying patient and following these simple steps helps us use the Piercing pattern safely and catch the start of a new upward move.
- Buy: To take a long position, buying can be executed either immediately after the closing of the second candlestick or upon the formation of a confirming candle.
- Stop Loss: The stop-loss point should be placed at a level 2% or 3% below the price just below the formation's lowest point or at a more secure price level immediately below it. The stop-loss level is often determined based on a support level below the Rising Sun or Piercing Pattern or as a specific percentage loss.
- Target: Target levels can be determined based on factors such as technical analysis tools, previous highs/lows, or Fibonacci retracement levels. The risk and reward ratio should also be considered in each trade.
The following Euro/British Pound currency pair chart shows
an example of a trade using the Rising Sun or Piercing candlestick pattern:
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| Piercing or Rising Sun Pattern on the Euro/GBP chart |
Always keep in mind: The Piercing or Rising Sun pattern may not always provide a definitive buy signal on its own, which is true for other candlestick patterns as well. It is recommended to use this pattern in conjunction with other technical analysis tools and indicators to confirm it in forex trading.