Tweezer bottom patterns are two candlestick patterns found near the bottom of downtrends or support levels. It’s important to be able to spot these patterns for downtrend reversals. They have co-equal bottoms and typically show signs of a reversal to the upside. Look for price to break above the second candle and hold to confirm bullish breakout and continuation.
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What Are Tweezer Bottom Patterns?
A tweezer bottom pattern consists of two candlesticks that form two valleys or support levels that are equal bottoms. Typically when the second candle forms, price cannot break below the first candle and causes a tweezer breakout.
This pattern can be seen as a reversal in a downtrend. May see the tweezer bottom at a turning point in the market or at a reversal of a stock. This pattern formation can allow for precision trading by trend traders; good setups for dip buying.
Tweezer bottom patterns usually occur while the stock is in a downtrend. Once a tweezer bottom is found be on the lookout for a reversal.
Price should move up. Remember to confirm with more indicators. Have an entry, exit and stop loss plan before making the trade. Having a game plan helps traders stay in a trade, as well as, helps with emotions.
The move up in price may not be drastic but a change in trend is indicated. A tweezer bottom pattern occurs when there are two days with near equal lows. Now we know it may not be perfect; one of the two lows may be a tad bit different.
That is allowed as long as it is not too different; must be pretty similar. This hammers out a pretty key support level. Especially if it lines up with a psychological number; such as a whole dollar or half dollar amount.
Trading tweezer bottoms is a good strategy on daily charts. If a stock that is oversold on a daily chart, hits a historic support level on a weekly chart, and forms a tweezer bottom, that is going to attract some attention and draw traders eyes.
Some people strictly scan for double bottom patterns, with a tweezer bottom on the daily time frame; then place a limit order to enter off any bounce on the tweezer bottoms high.
The 411
Tweezer bottoms are made up of two candles. The first candle should be a part of the current trend. In a perfect world the first candle would have a long real body; however this may not always be the case.
Do not get too worked up over a pattern that is not exact. The market can create chaos, thus patterns can be sloppy or clean. Confirm trades with volume and trend lines to increase confidence and possibly even the odds of success.
The second candle can be any size or shape. More than likely these two candlesticks are probably going to look different. As long as they have the same lows to form the pattern that is fine; the second candle may form different types of doji candlesticks.
How to Trade Tweezer Bottom Patterns
- Watch for 1st top candlestick to form
- Next, watch for 2nd candlestick for form a co-equal bottom
- Then, watch for 3rd candlestick to rise above 2nd
- Traders take a long once price breaks above the 2nd candlestick
- Place stop at bottom of the 2nd candle
- Some traders take a short position once price breaks below 2nd candle
- Then place stop above the 2nd candle
Tweezer bottom patterns tend to be a sign of a reversal but we know that sometimes that may not be the case. Traders could find a tweezer bottom but the stock pauses then continues the trend.
Technical analysis can help confirm moves. Tweezer bottoms form pretty key support levels. The stock has made two consecutive lows that the bears were not able to break.
Final Thoughts
Tweezer bottom patterns can be one of two things. It can be part of a pullback during the continuation of a trend or it can signal the reversal of a trend.
Confirmation of what a stock will do is always good to practice before placing an order. Always have a game plan before trading. Plan to fail, never fail to plan!
$AMD tweezer bottom setup, at $30.00 – ideal for a scalp trade allowing traders to enter on confirmation. Got a nice volume injection; Volume helps to confirm the strength of the move
