Definition - Occurring during a downtrend, the first day will see a black candlestick which is then followed by a white candlestick - this latter candlestick will open much lower but close at the previous close. As you may notice, there are certain similarities between this and the Piercing Line but there is a key difference to be seen in the rebound on the second day. In the Piercing Line, the midpoint of the first day’s body is the closing point whereas the Bullish Meeting Line sees the same close on both days. Therefore, this pattern shows more of a bottom reversal. Despite this, it can still be used and should be utilised often.
- On the first day of the pattern, the black candlestick will be observed during a market experiencing a prevailing downtrend.
- After this, a white candlestick will form on the second day.
- On both days, the same or similar closing price will be seen.
Patterns and Flexibility
Consisting of two candlesticks, the Bullish Meeting Line sees both a black and a white candlestick - neither can be short. As mentioned previously, the closing prices for both days will be similar or the same.
Behaviour of Trader
When this pattern occurs, it shows a stalemate between the bears and the bulls. At first, the downtrend in the market is somewhat strengthened by the formation of the black candlestick. Soon enough, the bears are made to feel more confident having seen the next day open much lower. However, the bulls start to push the prices back up and the price reaches the previous close. When this occurs, the downtrend is then breached.
Buy/Stop Loss Levels
For the confirmation to occur, the price has to cross above the line that is created by the last close; for the stop loss level, the last low will be used. If the prices fall rather than rise after the buy and there are two days of lows beneath the stop loss level, the stop loss will be triggered assuming that there is no bearish pattern.