Tweezers Top Candlestick Patterns – Formation and Trading Ideas
Tweezers Top Candlestick Pattern: Traders use technical analysis to analyze and predict future movements in market prices. Candlestick patterns are a part of technical analysis favored by traders to understand and predict future price movements of securities.
Here in this article we will discuss what the tweezers top candlestick pattern means, its formation and how to set up trades with the pattern formation.
Tweezers Top Candlestick Pattern – Definition
The tweezers top candlestick pattern is one of the patterns that appears frequently. These two candlestick patterns indicate a potential change in market sentiment and resistance in stock prices. This pattern provides early signs of a potential bearish reversal. The two candles in this pattern are:
- The first candle is bullish (green candle), indicating an upward movement in price.
- The second candle is in a downtrend (red candle), with the high price being the same as the high price of the previous candle.
This pattern can appear anywhere in the market and during any trend, but when this pattern forms during an uptrend, the strength of the bearish reversal indication is greater.
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Tweezer Top Candlestick Pattern – Formation
The formation of this pattern indicates a possible bearish reversal in the market. So, if market participants notice this pattern developing in stocks they have long positions in, they may consider closing their positions.
These patterns often form as a result of buying sentiment being exhausted or the price reaching a resistance zone. Market participants can use the tweezers top pattern along with other indicators such as RSI to confirm a bearish reversal and enter a short position in the stock.
Market participants should also remember that this pattern emerges sideways or sideways. turbulent market This pattern operates with a higher probability if it appears during an uptrend, thus reducing the chances of a negative reversal.
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Tweezers Top Candlestick Patterns – Psychology
When a tweezer top candlestick pattern typically appears in an uptrend, the green candlestick in the pattern indicates that there is buying pressure pushing the stock price higher. Here, the second candle fails to move above the high point of the first candle. This usually means that buyers are starting to tire and sellers may be starting to gain the upper hand on the stock.
The creation of such a pattern signals a change in market sentiment, and buyers will be cautious as a change in market attitude may lead to an increase in the number of sellers.
Tweezer Top Candlestick Pattern – Strength
There are several situations where the formation of this pattern has a stronger bearish reversal signal, these situations are:
- After a significant upward trend – If a tweezer-shaped candlestick pattern appears after a significant rise in the stock price, the likelihood of a downward reversal increases. The formation of this pattern signals the exhaustion of buyers, and those who took long positions during the uptrend can begin to take profits.
- RSI- in overbought area if RSI If a tweezer candle pattern is formed at an overbought level (above 70), the likelihood of a stock price decline increases.
- Formed in a strong resistance zone – A resistance zone forms when a stock’s price reacts to a particular price more than once, or reaches that price more than once and then declines in price. If the price reacts to that price multiple times, a strong resistance zone is formed. So when this pattern forms in that area, it means the price has reacted again and probably won’t go above that price.
Tweezer Top Candlestick Pattern – Trading Ideas
Traders should ensure that the previous trend before the formation of the Tweezer Top candlestick pattern was an uptrend. If this pattern forms in an uptrend, here are some guidelines for trading:
- entry: If the stock price starts trading below the closing price of the second candle of this tweezer top pattern, traders can take a short position in the stock.
- Target: Traders can exit a trade when the price of a security reaches an immediate support zone. Once this level is reached, you can also book a partial profit on the trade and hold the remaining position until the next support level.
- Stop Loss: Traders can set a stop loss near the high price of this pattern.
Tweezer Top Candlestick Pattern – Example
In the above HDFC BANK 1-day chart, we can observe the formation of a tweezers as follows. uptrend. As discussed in the article, after this pattern was formed, the price took a bearish reversal.
At the time this pattern was formed, traders could make short entries if the price fell below Rs. 995.25 anf stop loss was Rs. 1007.35
Read more: Basic analysis of JSW infrastructure
conclusion
In this post, we learned about the Tweezer Top candlestick pattern, its meaning, characteristics, and trading methods. The tweezers top indicates a strong bearish trend, which traders can confirm through the RSI indicator. Additionally, traders are advised to set an appropriate stop loss to manage risk in case a trade goes against the analysis.
Written by Praneeth Kadagi
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