Piercing line
A bullish two-candle reversal after a decline:
- Candle 1 is a long bearish candle.
- Candle 2 opens below candle 1's low — it gaps down through the prior range.
- Candle 2 then closes above the midpoint of candle 1's body.
The sequence matters. Sellers pushed to a new low, and then buyers not only recovered the whole candle but drove price back through the middle of the prior body. That is a stronger statement than a plain green candle, because it shows recovery from a genuine breakdown attempt.
Dark cloud cover
The exact mirror, at a top:
- Candle 1 is a long bullish candle.
- Candle 2 opens above candle 1's high.
- Candle 2 closes below the midpoint of candle 1's body.
Buyers made a new high and lost all of it plus half the prior body. The name is apt: a cloud has moved over the market.
Why the midpoint rule exists
It is a threshold, not a magic number. Recovering 10% of the prior body is noise; recovering 90% is close to an engulfing pattern. The 50% line is a conventional way of saying "the recovery has to be substantial". Some technicians use 60% or require a close above the prior body's midpoint and above the prior candle's close. There is no correct value — pick a threshold, write it down, and hold it so your readings stay comparable.
These are weaker than engulfing — treat them accordingly
Both patterns are defined by a measurement that many candles satisfy by accident, so they fire more often than engulfing patterns and are less reliable. Reasonable handling:
- Require the prior trend to be genuine, not just two candles of drift.
- Require the first candle to actually be long — a short-bodied first candle makes the 50% line meaningless.
- Wait for confirmation on the third candle rather than entering on the close of the second.
How to check this yourself
Take a daily chart and find ten cases where a candle opened beyond the prior candle's extreme and closed on the other side of it. Measure where each close landed relative to the prior body's midpoint. You will find a continuum — many close just past halfway, some recover nearly everything. Noticing that the "pattern" is a threshold imposed on a continuous distribution is the useful takeaway: it is a convention, not a law of markets.