Piercing Line is a strong candlestick pattern or signal. The power of this candlestick pattern, and whether you can trust it to go long (to buy) or not, depends on some important factors.

Now, before you read the rest of this article , please note that this is NOT a trading or investment advice and we are not trading and investment advisers. You understand that you invest/buy/sell/hold at your own risk.

First, let me show you a strong Piercing Line Candlestick Pattern that has formed on IBM’s monthly chart. It is a great news for the IBM’s share holders who where losing money on it for the past several years since 2013.

As you can see on the chart below, IBM has been going down since March 2013. It has formed a downtrend on the monthly chart. But now, the Piercing Line that has formed by the March and April 2020 candlesticks on IBM Stock Price chart has changed everything:

IBM's Stock Price

Why Such a Strong Buy Signal, or Long Trade Setup Has Formed on IBM Stock Price Chart???

It must be related to the Coronavirus Pandemic. Coronavirus has driven lots of attention to the software and computer-related companies, because when people have to work from home, they need computers, software and the related things.

The other question is: If the Coronavirus Pandemic has caused such a strong long trade setup to form on IBM Stock Price chart, then will this market start going down again when the Coronavirus Pandemic ends???

I don’t think so, because even if the Coronavirus Pandemic ends completely, it has taught people of the world a big lesson that will never be forgotten:

When a virus can make us lose our jobs, then we need a job or business that cannot be cancelled and terminated so easily. We have to improve our computer and internet-related skills to have a business that cannot be stopped so easily.

Therefore, I think computer and software-related companies will get more attention from now on.

I am not encouraging you to buy the computer and Internet-related companies’ shares. I am just analyzing the events and talking about my own ideas which can be wrong. But, when Warren Buffett has sold or is selling the shares of the travel-related companies because he says Coronavirus has changed the world and we have to invest differently from now on, then I think I am right when I say computer and software-related companies will get more attention from now on, and their downtrends will most probably  reverse.

Piercing Line Candlestick Pattern

Now, let’s analyze the Piercing Line that is formed on IBM Stock Price chart.

First, I must explain what Piercing Line is:

Piercing Line is a candlestick signal or pattern that forms by two candlesticks. The first candlestick is bearish, and the second one is bullish. To form a Piercing Line candlestick pattern, the second candlestick has to open below the close price of the first candlestick. Then it should go up, form a bullish body, and close below the open price of the first candlestick.

This is something that has formed on IBM Stock monthly price chart by March and April 2020 candlesticks:

Piercing Line Candlestick Pattern

Now, the questions is: Are all Piercing Line candlestick patterns strong enough to make you buy, get in the markets and go long?

No. There are some important factors that make a Piercing Line strong enough. I prefer too strong Piercing Line patterns that leave no doubt. I mean they tell you that they could never be stronger:

1. Candlesticks’ Sizes:

The two candlesticks that form a Piercing Line Pattern must be strong and long compared to the other candlesticks you see on the same chart. Even if they are not stronger than the other candlesticks of the same chart, they shouldn’t be smaller.

As you can see with the Piercing Line that has formed on IBM’s monthly chart, the two candlesticks are relatively strong.

2. Bollinger Lower Band Breakout:

I pay lots of attention to this factor. It makes a big difference.

While the two candlesticks that form a Piercing Line must be long and strong enough, they must have formed a strong Bollinger Lower Band Breakout.

As you can see with the Piercing Line that has formed on IBM’s monthly chart, the March 2020 candlestick has such a long lower shadow which has broken out of Bollinger Lower Band very strongly.

At the same time, the April 2020 candlestick has also formed a reasonable Bollinger Lower Band Breakout.

Therefore, I think IBM will go up to test the downtrend’s resistance line you see on the chart below. How long does it take to reach the resistance line, and whether it will break above it or not, is the matter of time. I can’t say when it will reach the resistance line, but I think it will break above it if it reaches the line:

IBM's Stock Price Downtrend's Resistance Line

What About You?

You also need a business that makes money for you consistently. A business that can’t go down or be closed by a virus is what everybody needs. You can have such a business.

The Coronavirus Pandemic proved that the future is in computer’s and the Internet’s hands. While most companies and business got bankrupt, companies like Amazon and Zoom doubled their wealth.

Isn’t this an awakening message for you???

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