Tweezers Tops And Bottoms

Tweezers are two or more candlestick lines with matching highs or lows. They are called tweezers because they are compared to the two prongs of a tweezers. In a rising market, a tweezers top is formed when the highs match. In a falling market, a tweezers bottom is made when the lows are the same. The tweezers could be composed of real bodies, shadows, and/or doji. A tweezers occurs on nearby or consecutive sessions and as such are usually not a vital reversal signal. They take on extra importance when they occur after an extended move or contain other bearish (for a top reversal) or a bullish (for a bottom reversal) candlestick signals. Exhibits 6.13 through 6.18 elaborate on this idea.

Exhibit 6.13 shows how, in an uptrend, a long white line is followed by a doji. This two-candlestick pattern, a harami cross with the same high, can be a significant reversal signal. Exhibit 6.14 illustrates a tweezers top formed by a long white candlestick and a hanging-man line during the next session. If the market opens under the hanging-man's real body, odds are strong that a top has been reached. The market should not close above the tweezers top in order for this bearish view to prevail. This two-line mixture can also be considered a harami. As such, it would be a top reversal pattern during an uptrend. Exhibit 6.15 illustrates a tweezers top joined with the second period's bearish shooting-star line. Although not a true shooting star, the second line is bearish based on the price action which creates it; the market opens near its

EXHIBIT 6.13. Tweezers Top and Harami Cross

EXHIBIT 6.14. Tweezers Top and Hanging Man

EXHIBIT 6.13. Tweezers Top and Harami Cross

EXHIBIT 6.14. Tweezers Top and Hanging Man

EXHIBIT 6.15. Tweezers Top and Shooting Star

EXHIBIT 6.16. Tweezers Top and Dark-cloud Cover

EXHIBIT 6.16. Tweezers Top and Dark-cloud Cover

EXHIBIT 6.17. Tweezers Bottom and Hammer

EXHIBIT 6.17. Tweezers Bottom and Hammer

EXHIBIT 6.18. Tweezers Bottom and Piercing Pattern

EXHIBIT 6.18. Tweezers Bottom and Piercing Pattern lows, rallies to the prior session's high, then closes near its low for the session. This would also be considered a harami pattern.

Exhibit 6.16 illustrates a variation on the dark-cloud cover. Here, the second day opens above the prior day's close (instead of above the prior day's high). The black candlestick day's high touches the prior period's high and then falls. This could be viewed as a combination of a dark-cloud cover and a tweezers top. Exhibit 6.17 shows a hammer session which successfully tests the prior long black candlestick's lows. The hammer, and the successful test of support, proves that the sellers are losing control of the market. This two-line combination can also be viewed as a harami. This would be another reason to view this action as important support. Exhibit 6.18 is a variation on the bullish piercing line with a tweezers bottom added in for good measure. A true piercing line would open under the prior day's low. Here it opened under the prior day's close.

These examples of tweezers are not inclusive. They are representative of how top and bottom tweezers should be confirmed by other candlestick indications so as to be valuable forecasting tools. For those who want a longer time perspective, tweezers tops and bottoms on the weekly and monthly candlestick charts made by consecutive candlesticks could be important reversal patterns. This would be true even without other candlestick confirmation because, on a weekly or monthly chart, for example, a low made the preceding session that is successfully tested this session could be an important base for a rally. Less important, and less likely to be a base for a rally, would be, on a daily chart, a low made yesterday that is successfully tested today.

Exhibit 6.19 illustrates tweezer tops and bottoms. The tweezers top was confirmed when the second day completed a bearish engulfing pattern. Tweezers bottom pattern 1 illustrates a star. Note also how this two-day tweezer bottom was a successful test of the piercing pattern from the prior week. Tweezers bottom 2 is a set of two hammers. The combination of these two bullish indications, the tweezers bottom and the hammers, set the stage for a rally.

Exhibit 6.20 shows that the lows made on January 24, near $.95, were retested a week later. The test was not only successful, but this test built a bullish engulfing pattern. Exhibit 6.21 shows that on February 14 and 15, a two-day tweezers bottom also established a bullish engulfing pattern. Exhibit 6.22 illustrates a hanging man following a long white candlestick. The highs on both of these weeks (as well as the next) were the same, thus creating a tweezers top. The two lines of the tweezers were also a harami pattern. Exhibit 6.23 shows that a variation of an evening star developed in late June. For a true evening star, we like to see a longer white candlestick as the first line in the pattern. Nonetheless, this

Tweezer Candlestick Formation

became a resistance area as proved by the following week's hanging man. The hanging man touched the prior week's highs and failed. This created a tweezers top.

At the August 1987 peaks, as shown in Exhibit 6.24, the S&P's long white candlestick followed by a doji formed a tweezers top which acted as resistance the next week. Besides the tweezers top, a doji after a long white candlestick at high price levels is dangerous. This feature is discussed in detail in Chapter 8.

More Reversal Formations 91

126 ffl2 13"

126 ffl2 13"

TT5"

EXHIBIT 6.20. Copper-May 1990, Daily (Tweezers Bottom)

EXHIBIT 6.21. Canadian Dollar—June 1990, Daily (Tweezers Bottom)

More Reversal Formations 93

EXHIBIT 6.22. Chrysler-Weekly, 1989-1990, (Tweezers Top)

Tweezer Tops

26MAY 2SJUL 29SEP 24N0U 26JAN90

Source: Bloomberg L.P.

26MAY 2SJUL 29SEP 24N0U 26JAN90

Source: Bloomberg L.P.

430 425 420 415 410

400 395

2JUN89 16 30 14JUL

Source: Bloomberg L.P.

EXHIBIT 6.23. Wheat-December 1989, Daily (Tweezers Top)

Candlesticks Tweezer Tops And Bottoms

2JUN89 16 30 14JUL

Source: Bloomberg L.P.

EXHIBIT 6.23. Wheat-December 1989, Daily (Tweezers Top)

EXHIBIT 6.24. S&P—Weekly (Tweezers Top)

Tweezers Tod . and Doi i

Jan 1987

Source: %Copyright 1990 Commodity Trend ServiceE

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