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Trading Strategies

What is the Tweezer Candlestick Formation?

What Is a Tweezer?

  • Tweezers form when two consecutive candlesticks have equal, or very close to equal, highs (tweezer top), or lows (tweezer bottom).
  • The equal highs or lows may also reflect the open or close of two consecutive candlesticks or a combination of both.
  • The colors of the candlesticks that form a tweezer generally don’t matter Tweezer form more often on smaller timeframe charts.

Why Are Tweezers Important?

  • May act as a leading indicator suggesting a short-term price swing/trend reversal may be in progress—much like a pair of tweezers picking out, or “plucking,” a top or a bottom on a price chart.
  • Completed tweezers may help to confirm whether a potential significant high or low has occurred.
  • Tweezers may also help confirm, or strengthen, other reversal indicators.
  • A failed tweezer may suggest a continuation move is in progress and can be helpful in stop-loss placement
  • A tweezer top “fails” when a new high is achieved immediately after completion (candle), and a tweezer bottom “fails” if the next candle achieves new low.

Why Are Tweezers Important?

Tweezers, as in all candlestick formations, are most effective when found at previously established support or resistance. For example, a tweezer may help confirm potential reversal when found at or near a trendline, Fibonacci support or resistance, previously established significant high or low, and especially at geo-harmonic pattern completion.

Tweezers may also be used to help confirm entry and are especially effective when in line with the overall trend. Although tweezers are signs of a potential reversal, an ideal application for placing an entry order is when a tweezer has developed at the competition of a short-term correction of a longer-term trend. The reason being, trading with the overall trend will typically lead to greater potential for reward, thus a more favorable risk to reward ratio. What is important to remember is tweezers do not indicate how long or far the potential reversal will last. Predetermined support and resistance levels should be determined in order to gauge risk vs. reward.

A tweezer bottom has formed increasing the odds of bullish reversal (rally)…

….zooming out we see the tweezer falls at bull trendline support adding confirmation to the projected rally …

…once the tweezer officially completes (next candle appears) we may decide to enter a long (buy) position with stop-loss placed below the tweezer bottom. Note: The bullish gap after the tweezer completes in this particular example adds a bit more bullish confirmation.

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