A Tweezer Bottom is a bullish reversal pattern formed by two Japanese candlesticks with matching lows. It appears at the bottom of downtrends and indicates that the selling pressure is weakening. The two candlesticks may be of any type (e.g., bullish or bearish), but they should have identical closing prices.
Here are the key characteristics of a Tweezer Bottom:
- Two candlesticks with matching lows: This is the key characteristic of the pattern. The lows of the two candlesticks should be identical, or nearly so.
- Occurs at the bottom of a downtrend: The pattern should appear at the end of a downtrend, where prices have been making lower lows.
- Confirmation candle: A bullish confirmation candle is needed to validate the pattern. This candle should close above the high of the previous two candlesticks.
Here are the different types of Tweezer Bottoms:
- Bullish Tweezer Bottom: This is the most common type of Tweezer Bottom. It is formed by two bullish candlesticks with matching lows.
- Bearish Tweezer Bottom: This is a less common type of Tweezer Bottom. It is formed by two bearish candlesticks with matching lows.
- Doji Tweezer Bottom: This is a rare type of Tweezer Bottom. It is formed by two Doji candlesticks with matching lows.
Here are some of the trading implications of a Tweezer Bottom:
- Bullish reversal: The pattern suggests that the downtrend is losing momentum and that a reversal is possible.
- Entry point: The confirmation candle provides an entry point for a long trade.
- Stop-loss: The stop-loss can be placed below the low of the confirmation candle.
Traders should always use other technical indicators and chart patterns to confirm the Tweezer Bottom pattern before making any trading decisions.
I hope this helps!