Similar to the engulfing pattern, the Piercing Line is a two-candle bullish reversal pattern, also occurring in downtrends. The first long black candle is followed by a white candle that opens lower than the previous close. Soon thereafter, the buying pressure pushes the price up halfway or more (preferably two-thirds of the way) into the real body of the black candle.

Following a downtrend, this is a Japanese candlestick line that has a long upper shadow and a small real body at the lower end of the session. The inverted hammer is a single bullish reversal candlestick pattern. Which means if the market is in a downtrend and you see the inverted hammer candlestick forms, there’s a likely chance that the market my start to reverse and head back up. However, if you are convinced that a change will occur, you can use spread bets or CFDs to trade. Both of these are ancillary products that allow investors to trade on both decreasing and rising prices. Nevertheless, if you are certain that a change will occur then you can trade by using spread bets or CFD’s.

How Do The Patterns Form?

This pattern always occurs at the bottom of a downtrend, signaling an imminent trend change. The unique three river is a candlestick pattern composed of three specific candles, and it may lead to a bullish reversal or a bearish continuation. The second candle cannot be a doji and the open on the second candle must be below the prior candle’s close. Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors.

On this BCH/USD one-hour chart, BCH is at the end of a clear downtrend. The green arrow highlights a hammer candlestick that is followed by a 36% move to the upside. In terms of market psychology, a hammer candlestick indicates a complete rejection of bears by the bulls.