Since candlesticks are the basic building block of most technical analysis, the ability to recognize different candlestick patterns is a crucial trading skill.
First though, let’s start with a definition.
What Is a Tweezer Top Pattern?
A tweezer top pattern is a 2-candlestick formation that may signal a bearish reversal. It may appear during an uptrend and is made up of a large bullish candlestick followed by a large bearish candlestick where the top of the bodies and wicks of each candle match each other.
It is a subtype of the tweezers pattern and the opposite of the tweezer bottom. For this pattern type, the length of the trend-side wicks form a price band that acts as a make-or-break range for future price action.
Of course, no candlestick pattern guarantees a particular outcome. Instead, they offer clues as to what is going on in the market.
So the question is, what does a tweezer pattern really tell you?
What Tweezer Top Patterns Mean
Like many candlestick patterns, the name itself doesn’t reveal much.
And unlike some, English speakers do not use the Japanese name for it. The term “tweezer” comes from the fact that it looks like a pair of tweezers. This is helpful only in the fact that it is easy to remember.
In trading terms:
- During the first period, price continued the pre-existing uptrend before pulling back below the high.
- During the second period, price moved back up until it reached the prior period’s high then fell back down near the open of the first period.
This sets the stage for bearish reversal, as it appears countertrend pressure is ready to take full control.
How To Recognize Tweezer Top Candlestick Patterns
Traders are attracted to patterns partly because they are easy to spot.
However, it’s also easy to see things on the charts that aren’t truly there (or anticipate events that never come to fruition). That’s one of the reasons why waiting for confirmation is so important.
Technically, a tweezer top pattern must:
- Appear during an uptrend
- Begin with a bullish long candle that has an upper wick, such as a bullish belt hold
- End with a bearish long candle that has an upper wick of approximately the same length as the first
In practicality though, many traders will make various exceptions.
- The second candle doesn’t necessarily have to be a long candle, as long as the wicks of both candles are even.
- The wicks of the two candles don’t necessarily have to match exactly, as long as both candles are long candles in which the open of the second matches the close of the first.
- The candles don’t necessarily have to have wicks, as long as the candle bodies are nearly identical in size.
Depending on who you ask, any of these standards may be more or less important. Moreover, some of these variations may be more properly classified as other reversal candlestick patterns.
Remember, identifying the reversal itself is more important than labeling the formation. That’s not to say these standards are completely unimportant (as we’ll touch on shortly). It’s just to say that the implications are more important than the criteria.
In other words, you need to put it into context.
Where Tweezer Tops Fit in the Chart Narrative
The markets are often characterized as a battle between the bulls and the bears.
Tweezer top patterns show that the bulls attempted to press their advantage on candle one but surrendered the momentum over the course of candle two.
On the chart, it looks like an about-face.
It might happen like this on a daily time frame:
On the first day, price surged upwards as the bulls maintained the status quo. Before the close, price pulled back slightly but not enough to warrant much concern. At the beginning of the first day, it seemed like the market was in for more of the same as price began to rise. However, the move stalled out upon reaching the previous day’s high. Sensing weakness, the bears made their move, pushing price all the way back down to the open of the day before.
From here, sellers know they need to defend this level to have a chance at changing the trend.
In the short-term, it amounts to a price action 180.
The question traders need to ask themselves is, “Is this the mark of a sea change or simply a routine correction?”
To answer that question, you’ll need more than just an understanding of Japanese candlesticks and candlestick patterns. You’ll want to analyze both within the context of greater chart patterns as well as trend and price levels. You’ll also want to make use of your own chart markup and indicators.
Analyze the history of your preferred asset(s) with respect to tweezer patterns and apply it to your own trading style.
Now, you can test (and/or stretch) the criteria we mentioned above to find the most tradeable opportunities. For example, you may find that tweezer tops perform more reliably when their upper wicks are larger. Or, you may find something else entirely.
Here is where the story in the charts begins to come into focus.
This is what we call technical analysis.
How To Trade Tweezer Top Patterns
Bearish reversal points are great places to exit longs or enter shorts.
Tweezer tops serve as easy-to-spot signs of potential bearish reversals—and may even lead to longer-term tops when found on higher time frames.
Generally, you can put more weight into multi-stick patterns than single candles. They give you more information over a longer amount of time. Still, it is considered unwise to trade based on candlestick patterns alone. They rarely have extremely high hit rates by themselves.
You need additional points of confluence to shift the probabilities in your favor.
Some of the more important ones include:
- Volume – Reversals are often accompanied by elevated trading volume. For tweezers, be on the lookout for it on both, but especially the second candle (or shortly thereafter).
- Price Formations – Tweezer tops that form near important resistance levels are usually more likely to lead to sustained reversals. They may also reinforce the strength of such levels.
- Oscillator Shift – Oscillating indicators like the RSI or stochastics are commonly used to identify reversals by analyzing slope, percentile, and/or divergence.
The fewer such factors corroborating the reversal, the less confident you can be about it.
It would be difficult to form a comprehensive trading strategy around tweezer patterns (whether bullish or bearish). There simply isn’t enough there to develop a strong edge. Even with a great understanding of trading math, orders, psychology, risk management, options, and automation, you’d still have a hard time.
You’re much better off building your strategy around other tools then using reversal patterns as an additional point of confirmation.
Patterns like the tweezer are much better idea givers than trade makers.
Other Candlestick Pattern Types
The tweezer top is but one of many candlestick patterns.
You’d be wise to get familiar with all of the other ones too.
- Abandoned Baby – Bearish/Bullish
- Counterattack Line – Bearish/Bullish
- Doji Star – Evening/Morning
- Engulfing – Bearish/Bullish
- Harami – Bearish/Bullish
- Harami Cross – Bearish/Bullish
- In Neck – Bearish/Bullish
- Mat Hold – Bearish/Bullish
- On Neck – Bearish/Bullish
- Star – Evening/Morning
- Tasuki Gap – Downside/Upside
- Three Inside – Down/Up
- Three Methods – Falling/Rising
- Three Outside – Down/Up
- Window – Falling/Rising
Sure, there are quite a few of them. But don’t let that intimidate you.
It’s unnecessary to memorize all the names and criteria for every pattern. What’s more important is to learn the principles of price action and technical analysis.
In fact, you’re free to forget all of the names and specifications as long as you can look at a group of candlesticks and understand what they are trying to tell you.
Takeaways
To review:
Tweezer tops are a type of candlestick pattern that signals a potential bearish reversal. While not a guarantee, their appearance may indicate that market conditions are changing. Thus, they can help you find winning trades.
Of course, there are other candlestick patterns that you should learn about. And even so, the ability to recognize patterns is not enough to trade successfully on its own.
Nonetheless, you’ve now added one more tool to your toolkit.
Have questions or more information to add? Contribute to the conversation in the comments below! Or, if you know someone who could benefit from this post, share it with them. You can also check out our Candlestick Patterns Guide to improve your candlestick analysis skills.