The bearish reversal that happens after the formation of a candlestick pattern is not abrupt. Instead, prices move in a bearish manner gradually while experiencing bullish pullbacks. In some situations, the price action may reverse completely. For this reason, the tweezer top candlestick pattern is said to be a short-term reversal pattern. Like most candlestick patterns, spotting a tweezer top pattern is relatively simple. Below are various factors to consider while identifying a tweezer top.
Firstly, a tweezer top pattern must occur towards the end of a clear uptrend swing high in market prices. This is because the tweezer top is considered a bearish reversal pattern and hence the price must first be moving in a strong bullish manner. Photo by Nataliya Vaitkevich from Pexels Secondly, both candlesticks in a tweezer top pattern must be at the same level.
This implies that this is a resistance level for the security being traded. The resistance level means that bulls are not willing to buy above that higher price while the bears are trying to sell, hence the resistance. Lastly, you could carry out a technical analysis to find out the resistance levels of the asset you intend to trade. If the resistance level you determine corresponds to the level of your tweezer top candlesticks, the pattern is confirmed.
It is important to note that a tweezer top pattern is more reliable if the first candle is longer than the second candle. Additionally, if the pattern is followed by another reversal formation it could be considered more reliable. Back to top How to Trade the Tweezer Top Pattern As it indicates a bearish reversal, after the formation of a tweezer top, traders look to enter the markets with a sell order.
The tweezer top pattern, especially in a clear uptrend will allow you to have an early entry which directly translates to larger profits. The first step to trading a tweezer top is understanding the resistance levels of the security you intend to trade.
This will help you confirm the tweezer top formation. After determining the resistance levels, you should then wait for a clear bullish trend. Remember, tweezer tops are formed at the end of clear uptrends. After confirming the tweezer top pattern, you should enter the trade after the formation of the third candlestick.
Usually, the third candlestick will be bearish. However, depending on the length of the previous candlestick it could be bullish with a bearish open and a bullish close. As the markets are volatile it is always advisable to place a protective stop loss just above the two candlesticks. This will close your sell order if the market continues in a bullish manner. Determining the resistance zone helps you spot reversals more quickly. After having the reversal zone, the trader waited for a strong bullish to form.
At the end of the bullish trend, a tweezer top was formed. The tweezer top pattern was confirmed after the formation of the third and fourth bearish candlesticks. At this point, it is safe to enter the markets with a sell order. As illustrated by the above setup, the prices went bullish for a while meaning more profit for the trader. As a part of risk management, the trader should have placed a stop loss just above the resistance level as sometimes prices break the resistance.
So this is an uptrend, obviously, you can that we pushed higher, we pushed more than pips to the upside, and then, at the top is actually what is of our interest. So, we have two Candlesticks and Tweezer is a two-candlestick pattern.
So, the market, more or less, as I said opens and it goes down, eliminating the entire gains of the day one, or the previous day. So, as I said three important conditions. The second condition would be that we are talking about two candles, the first one bullish, the second one is bearish, and the second one does not create a new high when we are talking about bearish Tweezer Tops. And, of course, everything that has been gained in the previous day must be erased with the second candle.
We go from 1. On the other side, bullish Tweezer Bottom it occurs during a downtrend when bears continue to take the price lower, as you can see here, so we have a downtrend, clear. Look, we have a big push here, from 1.
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