The Piercing Line pattern can be broadly classified into two categories namely the Bullish and Bearish Piercing Pattern. The conditions to be met for qualifying as a Bullish Piercing Pattern are as follows:
1. The body should cover the previous day’s low.
2. Today’s body should cover atleast 50% mark of the previous day’s body.
3. The upper tail should be small in size.
Thus it can be seen in the above shown chart representing the daily candlesticks pattern of ‘Ambuja Cements Ltd, that during the period from 25th of July 2017 to 2nd of August 2017, there has been a decline in the prices of the stock. Also, it can be seen that there has been an upsurge in the prices after that, and the green body can be clearly seen as engulfing atleast 50% of the previous day’s body, and the same also covers the lower limit of the previous day, which are some crucial aspects to confirm that it represents a Bullish Piercing Pattern.
Thus, in line with the above said principles, it can be inferred that the Bullish piercing pattern has been formed during the said period. The position to be taken by the trader is long, as the outlook appears to be bullish after the recent fall in prices. Keeping this in view, the appropriate entry price, target price and along with the stop loss have been determined.
