The Tweezer Bottom, also known as tweezers, is a reversal candlestick pattern that signals potential changes in the direction of the price. Both formations will have two candles that develop at the end of a trend.
This post details the Tweezer bottom candlestick pattern. Read on to understand it.
The tweezer bottom is a bullish reversal candlestick pattern created at the end of a downtrend. It has two candlesticks: one bearish and one bullish. Both would make almost the same lows.
A tweezer bottom would have been formed at the end of the downtrend, and here, prices make lower lows. The first candlestick in this pattern would be bearish in nature, and it is formed according to market expectations. As the pattern is created close to the support level, the sentiments of the traders reverse, and the buyers will begin to buy.
Since this type of high-sensitivity bullish candlestick is formed, it shows that the bulls have taken control of the price.
A third bullish candle will provide confirmation and traders will initiate long positions when the higher high of the older two candles is crossed, keeping the second candle low as a stop loss.
The three main steps to spot this pattern are:
The bullish tweezer will form at the end of a downtrend. Here, the first candle would be strong, bearish, and powerful, signalling the continuation of the downside move. The second candle would print a new short-term low before surging higher to erase all losses from the previous session.
Going forward, bulls will be able to build on the gains made during the second candlestick timeframe and finally push the price action higher, completely reversing the trend.
A strong bullish candle will further add to the overall bullishness of this candlestick chart pattern. This is one of the other reasons why a reversal would be extremely powerful.
Trading the bullish tweezer would not be very different from trading other bullish reversal candlestick patterns. For entry, you need to wait for the formation to be completed before you enter the trade.
The stop loss needs to be placed below the last low, as the new low will invalidate the pattern. Profit-taking orders, on the other hand, need to be calculated according to other technical analysis tools.
The pattern indicates that the market is bearish. The market sentiments are also bearish, and there is high supply and low demand, making the market pause further.