The tweezer top candlestick pattern assists day swing traders in analysing stock performances. These famous patterns establish trend reversals. This top tweezer candlestick pattern is typically seen when the high points of two candlesticks stay the same after an uptrend.
Here, we will discuss the details of the pattern and how to trade it.
The tweezer top candlestick pattern is a two-line pattern, though it is composed of more than two candles. It is, by nature, a bearish reversal pattern. The first line could be any candle in an uptrend or any colour. The subsequent candles could be of any colour or type, but all the prices will have to be of the same size.
It can act as a leading indicator to suggest a short-term price swing or trend reversal. Similar to a pair of tweezers used for plucking, these patterns can pluck out prices on a chart.
There are two candlesticks in a tweezer top: the first one is bullish, followed by a bearish one. Markets will experience a rising trend on the first day, and the second day also opens on a high note, attaining highs witnessed the day earlier.
However, the stocks will close on a weak note, represented by a large red or black candlestick. This pattern, however, is quite frequent, and you could encounter it quite often.
The following are some of the criteria that need to be satisfied for the successful formation of the pattern:
These candlestick patterns form when there is a rising trend in the entire market or a specific asset. As mentioned earlier, a green bullish candlestick will form on the first day. This candlestick represents a rise in the price of a stock.
The next day's high of a bearish candlestick will mean a particular resistance level in that stock. This will show that the market has bulls in increasing numbers, and these numbers are significant. They are not inclined to purchase more stocks at the respective price points.
Both top candles will have similar highs, representing some degree of resistance. The resistance will tell us that there is a trend reversal, and the stocks will start moving down in the second day's trading session.
Traders could get confirmation about the bearish reversal when they find the formation of a red candlestick.
The formation of this candlestick will indicate that bulls operating in the market are not inclined to purchase the stock. You could use market orders to trade these patterns. Moreover, you could also choose to sell-stop trade beneath the first shadow.
You could also opt for a loss higher than the candlestick. In the case of a bearish breakout, you could also execute the sell-stop trade. The markets would execute stop-loss on the initiation of this pattern.
The pros and cons of this pattern are listed in the table below:
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Benefits |
Drawbacks |
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This pattern can be identified easily, just by a glance. |
As the stock market is volatile, it could sometimes be inaccurate. |
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It can form frequently in different time frames of the market, and it is available at regular time intervals. |
It is an expensive source of time when dealing with longer time periods. |
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It is highly reliable for current and impending price movements. |
It has limited applicability when used in isolation. |
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It is a very useful tool when integrated with other tools. |