KLine Analysis Lesson 26: The Penetrating Line of Inverted Form

The piercing line is a signal of a bull market reversal.

Recognition Rule
1）The market was in a downward trend before, followed by the first negative line, continuing the downward trend;
2）The next day was a big positive line, with the opening price lower than the previous day's lowest price;
3）The closing price of the next day's bullish line must be higher than the midpoint of the first day's bullish line entity；

Psychological Analysis
The market was originally operating in a downward trend, and the first day's large negative line further placed the market in a strong bearish atmosphere. The occurrence of a short jump and low opening on the second day continued investor panic, but in the following day's trading, market sentiment may have gradually gathered due to certain factors, and ultimately closed with a positive line, and the closing price was higher than the midpoint of the previous day's negative line entity. This market behavior indicates that the bearers themselves initially diverged, and a potential market bottom has basically formed.

Related Forms
The penetration line has similarities with the continuous form of the entry line, waiting line, and insertion line mentioned earlier, but the difference is that the closing price of the second positive line must be higher than the midpoint of the first negative line entity, and the more it exceeds, the stronger the bullish signal in the future. If the closing price completely exceeds the first negative line entity, it will evolve into another reverse form mentioned earlier -Engulfing pattern 。

Practical Application

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Meiside(603041)

After a continuous negative decline before, the market continued to open low on the same day, but ultimately closed at a positive line. The next day, it continued to open high and rise high, and the trend later evolved from a decline to an upward trend.

***Risk statement***
KLine analysis is only an indicator tool used to judge the strength of buyers and sellers in the market and market sentiment. How to identify and study is subjective to some extent, and it needs to be determined in combination with volume and other factors. It may not be completely accurate to judge the future market. Many fundamental investors never analyzeKChoosing to hold high-quality individual stocks for a long time has also resulted in significant returns. Please evaluate for yourself whether and how to use itKLine tool.