PaperLesson: Tweezer Top

A Tweezer Top resembles a set of tweezers...you know those things used to pluck a few chin hairs? Yep, those.

It happens when you have two candles with equal highs hit the same resistance level.

The first candle could be green (indicating the market has been going up), but the second candle open at the same high but ends as a red candle.

This shows that sellers are coming in at the same price level and the bulls’ momentum may be fading.

Tweezer Tops can often be short-lived, which is why waiting for a few confirmation candles and a surge in volume is essential. While Tweezers are common chart patterns, you should avoid acting too quickly; their tendency to form "back-to-back" can create false signals if you don't wait for the trend reversal to be officially confirmed.

How to Trade It:

Don't jump in as soon as the second candle finishes. Wait for the third candle to move above the high of the Tweezer Bottom pattern. If the price starts climbing, the "floor" is confirmed. Tweezer Bottoms are much more reliable if they occur at a major support level that you’ve already identified on your chart. If they happen in "no man's land," they are more likely to be a false signal.

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