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Tuesday, April 1, 2008

TWEEZER BOTTOM VS. TWEEZER TOP

Both Tweezer Bottom & Tweezer Top are reversal patterns.
Whether a pattern is bearish or bullish reversal, it depends upon whether it appears at the end of a downtrend (Tweezer Bottom) or an uptrend (Tweezer Top).

A Tweezer pattern forms when two or more candlesticks touch the same bottom / low price (for Tweezer Bottom) or the same top / high price (for Tweezer Top).
In standard technical analysis, this pattern can be comparable to the Double Bottom or Double Top.

The Tweezer can be composed of candlesticks with real bodies, shadows, and/or doji candlestick.
They also may occur on consecutive or nearby trading sessions.
When the Tweezer occurs on two consecutive trading sessions, not only would it be easier to spot, the pattern also carries higher chances of reversal.

TWEEZER BOTTOM (BULLISH)
Tweezer Bottom
is a bottom reversal pattern / bullish reversal pattern.
It could be formed at the end of a downtrend, or during a pullback within an uptrend, or at the support.

Tweezer Bottom is formed when two or more candlesticks touch an identical bottom (low price), and then the price bounces higher.
The candlesticks can be composed of candlesticks with real bodies, shadows, and/or doji candlesticks.
For the candle’s body, the color of the body is not very important. It can be white (bullish candle) or black/red (bearish candle).

Some possibilities of Tweezer Bottom pattern:
* Two real candlestick bodies with the same low price.
* The lower shadows of two consecutive candles (e.g. two Hammers) touch an identical bottom level.
* The real body on the 1st day and the lower shadow of the following day hit the same low price.
* The lower shadow on the 1st day’s candle and the real body of the following day hit the same bottom level.



A Tweezer Bottom pattern is considered to be more significant when the two candlesticks that comprise the Tweezers pattern also form another candlestick reversal patterns.
For example:
If the two candlesticks of Harami Cross Bullish (or Harami Bullish) hit the same low price, it could be an important bullish reversal signal, as the same two candlesticks form a Tweezer Bottom as well as a Harami Cross Bullish (or Harami Bullish).

Basically, Tweezer Bottom implies that at the bottom level, bears (sellers) were not able to push the price lower. As a result, the pattern signifies a short-term support level and signals a possible turning point.
The price action immediately after the Tweezer Bottom candles should be watch carefully.
If the bottom / low price formed by the two candles is penetrated, then price is likely to decrease to at least the next important support level.
If the bottom / low price hold, then the Tweezer Bottom may provide a potential reversal signal.
A confirmation should be needed in terms of the price to continue to rise and even close higher.

TWEEZER TOP (BEARISH)
Tweezer Top
is a top reversal pattern / bearish reversal pattern.
It could be formed at the end of an uptrend, or during a bounce within a downtrend, or at the resistance.

Tweezer Top is formed when two or more candlesticks touch identical tops (high price), and then the price drops lower.
The candlesticks can be composed of real bodies, shadows, and/or dojis.

Some possibilities of Tweezer Top pattern:
* Two real candlestick bodies with the same high price.
* The upper shadows of two consecutive candles (e.g. two Shooting Stars) touch an identical top level.
* The real body on the 1st day and the upper shadow (or doji’s high) of the following day hit the same high price.
* The upper shadow (or doji’s high) on the 1st day’s candle and the real body of the following day hit the same top level.



A Tweezer Top pattern is considered to be more significant when the two candlesticks that comprise the Tweezers pattern also form another candlestick reversal patterns.
For example:
If the two candlesticks of Harami Cross Bearish (or Harami Bearish) hit the same high price, it could be an important bearish reversal signal, as the same two candlesticks form a Tweezer Top as well as a Harami Cross Bearish (or Harami Bearish).

Tweezer Top implies that at the top level, bulls (buyers) were not able to drive the price higher. As a result, the pattern signifies a short-term resistance level and signals a possible turning point.
The price action immediately after the Tweezer Top candles should be watch carefully.
If the top / high price formed by the two candles is penetrated, then price is likely to increase to at least the next important resistance level.
If the top / high price hold, then the Tweezer Top may provide a potential reversal signal.
A confirmation should be needed in terms of the price to continue to drop and even close lower.

To read about other Candlestick Patterns, go to: Learning Candlestick Charts.

Related Posts:
* A Chance to Learn from World Class Trading Experts For FREE You Should Not Miss
* Learning Charts Patterns
* Options Trading Basic – Part 1
* Options Trading Basic – Part 2
* Understanding Implied Volatility (IV)
* Option Greeks

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