- November 5, 2021
- Posted by: CoachShane
- Category: Trading Article
Tweezer top and bottom candlesticks are a two bar potential reversal candlestick pattern that can be found on any chart and timeframe.
I say “potential reversal” as we are looking for an end to the current trend but it is not guaranteed with any reversal patterns.
We have two types of Tweezers to look for:
- Tweezer bottom patterns are a bullish reversal pattern showing a potential end of a downtrend
- Tweezer top patterns are a bearish reversal pattern showing a potential end of an uptrend
This example is one variation of both Tweezer types.
There are two key things to look for in this pattern:
- The type of candlestick you have with the first candle
- Where the tops or bottoms line up.
Both Tweezer types have the first candlestick as a long body the shows directional intent. For example, the Tweezer bottom has a strong red candlestick that shows sellers in control.
The second candlestick can take many forms. You can see large body bars, doji candles, hammers, hanging man, virtually any type are fine.
We also need to see:
- Equal highs with Tweezer tops
- Equal lows with Tweezer bottoms
That characteristic is shown with the solid black lines in the graphic. Do the highs or lows need to be exact?
Price action traders will tell you that markets are imperfect and in trading, often times “close, is close enough”.
What Does The Tweezer Top Pattern Show
Keep in mind that we don’t trade a pattern. We are trading what the pattern is representing.
With the Tweezer top in an uptrend:
- Bulls are in charge and are driving the market up. This will be shown by the large bodied candle as the first candle in the pattern.
- The bulls are unable to make a new high price. Seeing the failure of price advancing, either longs are sold or new shorts enter the market.
Understanding what you are trading, you can see that the character of the first candlestick can have influence on the result of this pattern. The more bullish the candle is, the more potential we have for a reversal.
This is an extreme example where the bulls ran into a resistance level and fell apart the next day. Demoralized longs bailed on the move and you would have had longs simply profit taking after a large move such as this.
Tweezer Bottom Patterns
The bullish Tweezer is just the opposite of the bearish Tweezer.
Sellers are happy with the profits they are making until price finds a support level and reverses.
The second day opens and for a brief time during the session, it would have been red as it makes a low. Sideline sellers, seeing the strong bearish candlestick of day one, think there is further downside and look for price to break the support low of candlestick one.
Price reverses, turns into a bullish candle (called red to green) and this can be an entry for longs but certainly shorts are feeling the heat. A true trend reversal begins as the market starts making higher highs.
How To Trade Bottom and Top Tweezers
To be honest, these patterns can appear often depending on how tight your criteria is for matching highs or lows.
I do like the first candlestick to have a large real body as it indicates less indecision with the first candlestick. Remember, we want strong conviction in one direction and the second day being the one that flips traders to either exit or reverse.
To add to the probability of at least some reversal of price, it makes sense to find these patterns at a support level, a resistance level, or at a previous swing pivot.
Tweezer Bottom Candlestick Pattern
Are you looking for a trend reversal or a continuation of the trend?
- Price is in an uptrend, makes a corrective decline, you look for a Tweezer bottom reversal
- Up trending price forms a sideways consolidation. Traders look for Tweezer bottom reversal near the bottom of the range or just under the support level
In this example, the overall trend direction is up.
- Finding a Tweezer bottom at that bottom red line or just under the top red line (resistance)
- Corrective decline reversal zone
- After reversal, price can often pause and Tweezer bottom can be played
Price is in a down trend. A Tweezer bottom is put in at the red line which is a former resistance level now acting as support.
Finding reversals during a corrective decline can be tricky. Using the Tweezer bottom to show a potential change in direction can add to your entry tools.
Notice the second candlestick.
You can use a break of the high of the inside candlestick for your trade entry with your stop loss below the low of the two candle pattern.
Tweezer Top Candlestick Pattern
For the bearish Tweezer, we are looking for the end of an uptrend or a reversal off the corrective rally of a pullback in a down trending market.
This is interesting as we actually have 3 equal highs in this uptrend.
However, the second candlestick in the middle is green and we want to see it to be a bearish candle. We get that as a hanging man in the third candlestick giving you a potential trade signal short.
This is a bearish trend and a corrective rally.
We see a strong momentum bullish candle, the tweezer top candlestick pattern sets up and a former support level turned resistance, and price collapses with a strong move forming a bearish candle.
This is still an inside candle and we can just play a break of the low of candlestick two once this sell signal sets up.
Tweezer patterns show the failure of a strong move to advance.
Trading the theory behind the pattern, we are looking for traders to exit positions or enter new positions when price is failing to advance in the main direction.
Using confirming variables, such as support and resistance zones or other technical indicators, can be a useful addition.
I would personally consider these as short term trades at first. Price would then have to confirm a full trend change through price action or an indicator.
Entries can be simply a break of the high or low of the second candle in the pattern.
A stop loss can be placed above or below the extreme of the pattern.
Ensure you test out your trading plan before entering the market with real money.