Posted in Finance, Accounting and Economics Terms, Total Reads: 268
A Tweezer is a pattern formed in technical analysis when two or more candlesticks reflect the same bottom/low price or the same top/high price. This low price is called the Tweezer bottom while the high price is referred to as Tweezer top. Tweezer bottom and top are reversal patterns in technical analysis. The Tweezer pattern helps to discern if the pattern signifies a reversal from bearish to bullish trend and vice-versa. Tweezers signify a reversal in a short-term trend in options trading. When Tweezers occur on 2 successive trading sessions, it is easier to spot the pattern and signal a high chance of a trend reversal.
The Tweezer bottom is a bullish reversal pattern that occurs during a downtrend. The bears push prices down to the lows at the close of the first day. On the second day, the trend of investors reverses with investors pushing the prices upwards thereby eliminating all or some of the losses of the previous day. The Tweezer top, on the other hand, is a bearish reversal pattern that occurs during an uptrend. The bulls push prices up to the highs at the close of the first day. On the second day, the trend of investors reverses with investors pushing the prices down thereby eliminating all or some of the gains of the previous day.
Tweezer tops or bottoms can be formed by two or more candlesticks. The price level of the candlesticks must be tested to check if they have the same high or low levels. The image below shows the candlestick patterns for a tweezer top and tweezer bottom formation.