Tweezer top patterns are a two candlestick reversal pattern with co-equal tops. This pattern can form at turning points in the market near support levels signaling a bearish reversal. Trend traders can find a tweezer top pattern to be really helpful because of what it means. Knowing when a trend is going to end and one begins is pretty helpful. Look for price to break below 2nd candle to confirm bearish reversal. Watch our video on how to identify and trade tweezer top patterns.
What Is a Tweezer Top Pattern & How to Identify These Patterns?
A tweezer top pattern consists of two candlesticks that form two peaks or resistance levels that are equal height. Typically when the 2nd candle forms, it can’t break above the first candle and causes a tweezer top failure.
Buyers and sellers are always fighting to take control of markets. This tug of war has stocks changing directions all the time. Knowing when that’s going to happen makes for successful trading.
Japanese candlesticks patterns allow us to see price movement as well as showing us how traders feel about securities. That way we don’t have to trade blind hoping we made the right decision.
Basics of Tweezer Top Patterns
Tweezer top patterns are a two candlestick pattern. A tweezer top occurs after price has been moving up. Two candlesticks form highs that are almost if not the exact same.
By now, you’ve probably realized that patterns and candlesticks aren’t picture perfect. So while perfect tweezer tops would have equal highs, it’s ok if one high is a tiny bit higher than the other.
In order for the 2 candles to be considered a tweezer top pattern, the first candlestick should to have a long real body. It doesn’t matter if they’re bearish candlesticks or marubuzo candlesticks.
The second candlestick can be any size. So the two candles can look a lot different from each other. You could see hammer candlesticks next to the first candlestick.
As long as the highs of those 2 days are same, it doesn’t matter what the candlesticks look like. The first candle should move in the direction of the trend. The second candle can pause or completely reverse the trend. This could be why doji candlesticks tend to form the second part of the pattern. Hence the importance of knowing candlesticks and technical analysis (bookmark our penny stocks list and stock watch lists pages, which are updated daily).
Technicals of Tweezer Top Patterns
Trading patterns allows traders to see when a change is coming. All those candlesticks on charts group together and make continuation or reversal patterns.
Tweezer top patterns signal a reversal but patterns break down all the time. It’s important to be able to see what other pattern the tweezer top is in.
You can look at the big picture of a chart to find the big pattern. Then zoom in to see the smaller patterns forming inside the large one.
By zooming in you can see a tweezer top pattern. You can capitalize on a short term move especially if you’re using penny stock trading strategies.
How to Trade Tweezer Top Patterns
- How to trade tweezer top patterns:
- Watch for 1st top candlestick to form
- Next, watch for 2nd candlestick for form a co-equal top
- Then, watch for 3rd candlestick to fall below 2nd
- Traders take a short once price breaks below the 2nd candlestick
- Place stop at top of the 2nd candle
- Some traders take a long position once price breaks above 2nd candle
- Then place stop below the 2nd candle
You need confirmation of a reversal when you see them. You can get that from technical indicators. Candlesticks form support and resistance along with moving average lines.
MACD can signal you when a stick is going to cross over into bullish or bearish territory. RSI tells you when a stock is overbought or oversold.
An oversold or overbought stock is going to correct itself. It’s may not happen right that second but you need to keep an eye on it.
Moving averages provide equilibrium for stocks. When a stock moves away from those moving average lines, it’s going to come back to them at some point.
When tweezer top patterns form, they tend to be in a bullish trend. Bullish stocks can be trading above those moving averages. Hence the reversal. They need to go back to equilibrium. We teach how to trade candlesticks in our trading rooms. Check out our trading service to learn more.
Tweezer top patterns happen quite frequently on charts. It depends on what conditions the tweezer tops form in as to whether or not they really don’t mean anything or they’re trade worthy. Take our candlestick reversals course.
They can be continuation candles if they form in a pullback of a strong trend. This would allow you to get an entry.
When they form at the top of a trend, you know a reversal is coming. You can use that to short or buy/sell put options.
That’s why technical analysis is important. Technicals allow you to confirm the shift in momentum. Take our free online trading courses for beginners.