A tweezer is a pattern found in the technical analysis of options trading. Tweezer patterns occur when two or more candlesticks touch the same bottom for a tweezer bottom pattern or top for a tweezer top pattern. This type of pattern can be made with candlestick charts of various types.
Tweezer bottoms are considered to be short-term bullish reversal patterns. Tops are bearish, and either end means that buyers or sellers were not able to push the top or bottom any further. Both types of patterns require close observation and research in order to be interpreted and used correctly.
As an investment strategy, tweezers offer traders a level of precision when seeking to take advantage of market trends. While tweezers can take on a variety of appearances, they all have a couple of traits in common: Sometimes appearing at market-turning points, these candlestick patterns can be used for analysis purposes — to simply indicate the possibility of a reversal — or they can be used within a broader context of market analysis to provide trade signals for trend traders.
Tweezers were made mainstream in Steve Nison's popular candlestick charting book Japanese Candlestick Charting Techniques. Candlestick methods are characterized by the body of a candle which is created by the difference between the open and close, while the thin "shadows" on either end of the candle mark the high and low over that period. A dark or red candle indicates the close was below the open, while a white or green candle highlights the price closing higher than it opened.
A bearish tweezer top occurs during an uptrend when bulls push prices higher, often ending the day near the highs (generally considered a strong bullish signal). Then, on the following (second) day, traders reverse their market sentiment. Often, the market opens and heads straight south, often eliminating most of Day 1's gains. On the flip side, a bullish tweezer bottom is realized during a downtrend when bears continue to drive prices lower, usually closing the day near lows (usually a strong bearish trend). Again, Day 2 is a reversal, as prices open and head sharply higher. A bullish advance on Day 2 can quickly eliminate losses from the previous trading day.