Candlesticks Charts & Patterns
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Tweezer Top and Bottom Candlestick Pattern
A tweezer top and bottom are very similar to a double top or a double bottom formation on any price chart. Let us discuss more on this candlestick pattern and understand the concept behind it.
What is a Tweezer Top and Tweezer Bottom Candlestick Pattern?
The tweezer pattern is a reversal pattern that consists of two candlesticks. They help the traders by providing trade signals. The basic criteria of formation of these patterns is that the 1st candle colour will always be of the prior trend and the second candle colour will be of the reversal colour opposite to the 1st one. The real bodies are not important in these candles. The shadows should match.
The tweezer top candlestick pattern is a bearish reversal pattern that consists of two candlesticks. The 1st candle is a bullish candle and the second is a bearish candle. Both the candles should have matching highs or upper shadows at the same level.
The tweezer bottom candlestick pattern is a bullish reversal pattern that consists of two candlesticks. The 1st candle is a bearish candle and the second is a bullish candle. Both the candles should have matching lows or lower shadows at the same level.
What is the psychology behind the pattern?
A Tweezer Top is formed at the end of an uptrend where the prices make higher highs. The first candlestick of this pattern is a bullish candlestick that is formed as per the expectations of the current market sentiment. As this pattern is formed near the resistance level, the sentiments of the traders reverses and they begin to sell. Due to this bearish sentiment a bearish candlestick is formed that indicates that the bears have taken control over the prices.
A Tweezer Bottom is formed at the end of a downtrend where the prices make lower lows. The first candlestick of this pattern is a bearish candlestick that is formed as per the expectations of the current market sentiment. As this pattern is formed near the support level, the sentiments of the traders reverses and they begin to buy. Due to this bullish sentiment a bullish candlestick is formed that indicates that the bulls have taken control over the prices.
Please note the colour of the candle is not that important in the case of tweezer tops and tweezer bottoms candlestick patterns. As you see in the above diagram, there are multiple ways tweezer tops and bottoms are formed. The important thing to keep in mind is that in the case of the tweezer top, both the candles' tops should be almost similar and in the case of the tweezer bottom, both the candles' bottoms should be the same.
In the case of a tweezer top candlestick pattern, the confirmation is given by the bearish candle on the third candle. One can initiate a sell trade when the lower low of the two candles are breached keeping the high of the candle 2 as the stoploss.
In case of the tweezer bottom, the confirmation is obtained by the third bullish candle. One can initiate a long position when the higher high of the previous two candles is crossed, keeping second candles’s low as the stoploss.