Piercing Line Candlestick - Russell 2000

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The chart above is of the Russell 2000 index. Every chart tells a story. The charts and experiences you live through in real time so that you understand the emotion that accompanies them will have the greatest impression and learning value on you.

When the market is in freefall, certain price pattern consistently emerge at the turning points, some higher reliability, some with lower. A piercing line pattern happens when the market is downtrending, and then there is a gap down, but there is immediate buying and the close of the day closes well into the prior black(down day) candle. The rule is that the close of the piercing day should be at or above the halfway point of the prior black candle. The larger the gap down, the higher the volume, and the higher the close, the more bullish the interpretation. One interesting thing about the current candle is that it has a long lower shadow also. While this is not your typical piercing pattern candle, the rejection of lower prices should not logically be any more bearish than a classic candle that advances right from the open.

All the major indexes showed bullish candlesticks at the close Friday. This has not occurred in a couple weeks, so maybe we will finally see a bounce right now. In order to have a good confirmation that we may see some legitimate buying pressure for several days or weeks, we would want to see a large white candlestick tomorrow or a large gap up with at least some additional gains that hold into the close.

Pete