The tweezer candlestick pattern can be one of the most powerful predictive patterns we see showing up on our stock charts. Over years of trading, we have learned to trust the signal as it predictive natural is usually correct. However, the challenge is accurately interpreting the pattern because there are so many possible variations to it.
The Tweezer Pattern is made up of two candle lines with matching highs or lows. In and of itself, this definition is not overly descriptive, which is why a lot of people struggle to define it. So let’s break it down even further by defining the tweezer top and tweezer bottom patterns.
Two candle lines with matching highs, after a swing high, where the first candle is white, and the second candle is black.
Two candle lines with matching lows, after a swing low, where the first candle is black, and the second candle is white.
The most important thing to consider when identifying any candlestick pattern is the location. Where is this pattern occurring? Bearish reversal patterns need to occur after an upswing, whereas bullish patterns need to occur after a downswing.
The real power of a candle’s sentiment is dependent upon location. As some candles take on a different meaning altogether in different locations, even though the structure of the candle stays the same.
In the picture above, there is a small spinning top candle at resistance with a long lower shadow. This candle is a weak bearish reversal pattern called the hangman. But the same candle structure, a small spinning top with a long lower shadow, if it occurs at support, is a hammer which is a very strong bullish reversal pattern.
Alternating colors, besides location, the most important thing in identifying the tweezer pattern is the order of the color of the candles. A tweezer top must occur at the top of an upswing and with the alternating color of white to black.
The color is essential because that is the story of the sentiment we are interpreting. The trade is running up and has a strong white candle. It then immediately reverses the next day and takes out all of the progress, which is represented by a strong black candle. This is a signal of shifting market sentiment. In the case of a tweezer bottom, it must occur at the bottom of a downswing and with the alternating color of black to white.
Again, the color of the candlesticks is essential because that is the story of the market sentiment we are interpreting. The trade is running down and has a strong down day in the form of a strong black candle and immediately reverses the next day and takes out all of the bearish progression in favor of upward momentum, which is represented by a strong white candle. Once Again, this is a signal of shifting market sentiment. The color of the candles is vital to the sentiment behind them, but these are not the only things to consider in the correct identification of the candlestick as a candle’s shadow tells a story of its own as well.
Another question a lot of people have is about the candle shadows is, do they count? The candle shadows are not considered in determining whether or not the pattern is a tweezer. If one candle had an extra-long shadow it might slightly adjust how we would interpret the pattern, but typically when we see a long shadow with a tweezer top it is an upper shadow, and this reinforces the bearish nature of a tweezer top.
Similarly, when we typically see a long shadow with a tweezer bottom, it is a lower shadow, which reinforces the bullish nature of the tweezer bottom.
Finally, one of the most confusing part of identifying tweezer candlestick patterns is the size of the candle’s body. One of the things that leaves this pattern open to so much subjectivity is the reality that the candle bodies don't have to be a specific size or relationship to each other.
All of these patterns are tweezer patterns:
You can see how some of these patterns might not indicate that big of a reversal signal. The mere fact that the highs or lows of the candle are matching does not specifically mean we have a reversal at hand. The nebulous nature of this broad definition makes predicting tweezer candlestick follow through somewhat difficult.
According to the broad definition of tweezers, these patterns do not appear that special and may or may not lead to a reversal. Thomas Bukowski suggests it may only be around a 50/50 chance of a reversal. But he uses a very broad definition in identifying this pattern, so consequently, he gets very broad results.
If you identify the right tweezer pattern, the reliability is an incredible high. What is the best tweezer pattern? Despite the statistics, we have found that certain variations of tweezer patterns are shockingly reliable. When you identify a tweezer top or bottom where the candles have fairly large candle bodies and the bodies are about the same size, the tweezer trade usually swings the other direction.
By identifying the perfect tweezer candlestick pattern, now you should understand better how to identify the ideal tweezer candlestick pattern.
Now you should have a much better idea of how to identify and interpret the tweezer candlestick patterns. Overall, these patterns are a good signal that this trade is about to swing in the other direction.