The Tweezer Top formation is a bearish reversal pattern seen at the top of uptrends and the Tweezer Bottom formation is a bullish reversal pattern seen at the bottom of downtrends.
Tweezer Top formation consists of two candlesticks:
- Bullish Candle (Day 1)
- Bearish Candle (Day 2)
Tweezer Bottom formation consists of two candlesticks:
- Bearish Candle (Day 1)
- Bullish Candle (Day 2)
Sometimes Tweezer Tops or Bottoms have three candlesticks.
A bearish Tweezer Top occurs during an uptrend when bulls take prices higher, often closing the day off near the highs (a bullish sign). However, on the second day, how traders feel (i.e. their sentiment) reverses completely. The market opens and goes straight down, often eliminating the entire gains of Day 1.
The reverse, a bullish Tweezer Bottom occurs during a downtrend when bears continue to take prices lower, usually closing the day near the lows (a bearish sign). Nevertheless, Day 2 is completely opposite because prices open and go nowhere but upwards. This bullish advance on Day 2 sometimes eliminates all losses from the previous day.
Tweezer Bottom Candlestick Chart Example
A Tweezer Bottom is shown below in the chart of Exxon-Mobil (XOM) stock:
The bears pushed the price of Exxon-Mobil (XOM) downwards on Day 1; however, the market on Day 2 opened where prices closed on Day 1 and went straight up, reversing the losses of Day 2. A buy signal would generally be given on the day after the Tweezer Bottom, assuming the candlestick was bullish green.
An interesting chart and explanation of what occurs intra-day during a Tweezer Top and Bottom is discussed on the next page.
