Tweezer candlestick pattern Guide ( PDF )
Tweezer candlestick pattern represents an interesting price formation that often occurs in financial markets. Indeed, this pattern can appear as a tweezer top pattern or a tweezer bottom pattern. However, the Tweezer candlestick pattern is considered a reversal pattern composed of two candlesticks. These candlesticks are so similar to a formation of a double top or a double bottom on any price chart. So let us understand better this pattern, and discuss the concept behind it.
Tweezer candle FAQ
What is Tweezer candlestick pattern ?
Tweezer candlestick pattern is a technical analysis pattern. It usually involves two candlesticks, which can signify a market top or bottom. Tweezers are reversal patterns and occur when two or more candlesticks touch the same bottom for a bottom tweezer pattern. Or when two or more candlesticks touch the same top for a top tweezer.
Indeed, Steve Nison, the man widely credited with popularizing candlestick charting in the West. He introduced the tweezer bottom and trim pattern in his book “Japanese Candlestick Charting Techniques”. Tweezers can look different, but they all have a few things in common. Sometimes they appear at times of market reversals. And can be useful for analytical purposes. They can just point to the possibility of a reversal. They can also be useful in a broader market analysis context. This is to provide trade signals to trend traders.
Tweezer top pattern example
Tweezer Top is a bearish reversal pattern. We can spot it at the top of uptrends. It consists of two Japanese candlesticks with equal tops. These tops are usually composed of shadows but can be as well the body of the candle. Nevertheless, the Tweezer top pattern occurs in an uptrend when demand pushes prices higher. It often ends the session near the highs. But They are not able to push the top any further.
How to recognize it?
To identify this pattern, you should look for the following criteria:
- There should be two or more consecutive candles of either color.
- A clear uptrend must be present.
- Both candles should reach the same high point.
So, once you observe an uptrend, simply look for candles that have equal highs. Finally, you shouldn’t completely ignore the body color and the shape of the candles, because these factors are a little bit important.
How to interpret it?
The upper shadows of the two candles signify an area of resistance. By remarking the tweezer candlestick pattern similar to Kicker Pattern, the buyers were not willing to buy above the highest price. So the bears returned and overpowered the buyers. They pushed the price back down.
Since two or more candles have shadows at this same level. This confirms the strength of the resistance and shows that the uptrend has likely paused. Or even worse, it has reversed into a downtrend. Below, is an example of a chart that shows the top pattern.
Tweezer bottom pattern example
Tweezer candlestick bottom pattern is a bullish reversal pattern. We can spot it at the bottom of downtrends. It consists of two Japanese candlesticks with equal bottoms. The equal bottoms are usually composed of shadows. but can be as well the bodies of the candle.
A Tweezer Bottom occurs in a downtrend when the offer pushes prices lower. It often ends the session near the lows. But they are not able to push the bottom any further. Tweezer Bottoms are short-term bullish reversal patterns that signal a market downtrend.
How to recognize it?
To spot this Bottom pattern, you should look for the following criteria:
- There should be two or more consecutive candles of either color.
- A clear downtrend must be present.
- Both candles should reach the same low point.
So, once you observe a downtrend, simply look for candles that have equal lows. As we mentioned in the tweezer top, you shouldn’t completely ignore the body color and the shape of the candles, because these factors are a little bit important.
How to interpret it?
The lower shadows of the two candles signify an area of support. The sellers were not willing to sell below that lowest price. So the bulls returned and overpowered the sellers. They pushed the price back up. Since two or more candles have shadows at this same level. This confirms the strength of the support and shows that the downtrend has likely paused. Or even worse, has reversed into an uptrend. Like the Tweezer top, the Tweezer bottom indicates a reversal pattern. So, to better analyze a specific Tweezer bottom pattern, observe the following:
- If the Tweezer Bottom appears in a downtrend, it is more reliable.
- When the first candle has a larger body than the second candle, the reversal is more reliable.
- If after the Tweezer Bottom there is another reversal pattern, such as a Bullish Engulfing, with identical lows, it is even more reliable.
You can see below, a screenshot of a chart that shows the tweezer candlestick bottom pattern.
How to trade With Tweezer’s top and bottom pattern?
Tweezer bottoms are considered short-term bullish reversal patterns. While tweezer tops are considered bearish reversals. Essentially, with both formations, neither the buyers nor the sellers were able to push the top or bottom any further. Both types of tweezer candlestick patterns require extensive observation and research to be interpreted and used correctly.
As an investment strategy, this candlestick pattern offers traders a level of precision when looking to take advantage of market trends. Although tweezers can take on a variety of appearances. They all have two things in common. Sometimes appearing at times of market reversals. These candlestick patterns can be useful for analytical purposes – to simply indicate the possibility of a reversal – or they can be used in a broader market analysis context to provide trade signals to trend traders.
Tweezer candlestick patterns were generalized in Steve Nison’s famous candlestick charting book, Japanese Candlestick Charting Techniques. While the thin ‘shadows’ at each end of the candle mark the high and low during this period. A dark or red candle says that the close was below the open. While a white or green candle highlights the close price above the open.
Examples of tweezer patterns
Top Tweezer example
A good example of the tweezer top figure is in the chart below. In this chart, we see that the tweezer candlestick pattern formed at 1,05971 (the black line). In this case, you could have placed a sell-stop at the level shown in blue.
Bottom tweezer example
Similarly, in the chart below, we see that the EUR/USD pair forms a tweezer bottom figure. Therefore, in this case, you could have placed a buy-stop trade at the level shown in blue.
Conclusion
When traders remark on the formation of tweezer top and bottom candlestick patterns on the charts. They should get conscience that a reversal is going to get a place. They should square off their position when this reversal pattern forms. Also, traders must also confirm the formation of the tweezer candlestick pattern with other technical indicators.