While trading in the share market, you need to make calculated decisions. Apart from personal factors such as your risk appetites, investment goals, and time-frames, you also have to consider the factors affecting the stocks in which you are investing. This, you can do, with the help of various analytical charts. The tweezer bottom candlestick pattern is one such means of analysis, and here’s a detailed guide to help you understand it.
Tweezer bottom pattern – Definition and explanation
A tweezer bottom is a pattern that is formed during a developed bearish trend. The pattern has a low point which may be tested one or more times, indicating clearly that bulls will not allow the prices to reduce further. This pattern typically consists of several candles, though it is traditionally viewed as a pattern comprising of two candles. The only condition in the case of tweezer bottoms is that the first candle’s low point is defended effectively and it remains intact. The basic interpretation of this tweezer pattern is that it is a bullish reversal signal, which means that it indicates an imminent, impending positive trend.
Fundamental aspects of tweezer bottom candle pattern – Characteristics and recognition
There are three ways to characterise and recognise candles in tweezer bottoms. They are as under:
1. The first candle in this pattern typically has a significant, low wick, which could be either bullish or bearish.
2. The second candle in the bottom pattern may also be either bullish or bearish, but it may revisit the previous candle’s low, without breaking it.
3. So long as the first candle’s low remains unchanged, and the next candles continue to retest that level, the tweezer bottom pattern could comprise many candles.
Tweezer bottom candlestick and market indication
To understand what tweezer bottoms may be telling us about the market, we have to assume that the market is currently in a bearish trend, i.e. it is falling. As such, market sentiments are also bearish, with high supply and low demand, which pushes the market further down. Most market participants, at this stage, believe in the falling prices.
Now, as the first candle of the tweezer bottom candle forms, it seems ordinary. The candle forms a new low and then retraces slightly before closing on a high. The second candle forms now. It does not manage to break the previous candle’s low, but it closes above it. It is at this point that you can start noticing a change. Despite their absence for some time, the bulls now seem to have enough strength, enabling them to defend a previous low, which is essentially a bullish sign.
As it is true of all share market investments, there are various strategies at play when it comes to investments. The same can be said about reading candlestick pattern charts and making subsequent investments. If you need any help regarding understanding and leveraging tweezer bottom candlestick patterns, you can reach out to our experts at Angel One.