Candlesticks – Tweezer Bottom
The Tweezer Bottom is a moderately reliable bullish reversal formation consisting of two candlesticks, generally seen at the end of a downtrend. The first candlestick in the pattern is a declining black candle, while the second candlestick is a rising white candle. The Tweezer Bottom generally establishes a line of support at the low point of a strengthening trend and is often an indication that the market is ready to reverse and trade higher.
While some candlestick chartists insist that the shadows for candlesticks in the Tweezer Bottom formation should be at least 60 percent as long as the body, others are of the opinion that any two candlesticks can be Tweezer Bottoms, as long as the low price of both candles is the same.
The characteristics of this reversal pattern consists of a bearish first day, when the price of the stock or commodity continues declining throughout the session and then ends the day at or near the day’s low. On the following day, the market opens at or near the previous day’s close and proceeds to rally, eliminating all or nearly all of the previous day’s losses.
As lower prices attract more buyers, substantial buying interest surfaces that continues throughout the trading session, driving the market through the previous day’s high. The action forms a white candlestick that completely engulfs the previous day’s black candlestick body and would ideally, but not necessarily, include the wicks.
Traders will generally buy the market using the Tweezer Bottom formation as a reference point, although, caution is advised. According to some analysts, a Tweezer Bottom formation has more than a 50 percent probability of preceding a breakout to the downside, making it imperative to have a well-placed stop loss order in case this occurs.
Stocks that have demonstrated a bullish Tweezer Bottom formation are listed below.
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