Tweezer tops and bottoms on gold

Tweezer tops and bottoms are two consecutive candles with the same high at the end of a rise, or the same low at the end of a fall. They are read as a level the market refused twice. This page explains how exact the match must be and why it is weak evidence alone. The pattern describes what price has already done, not what it will do next.

What a tweezer top is

A tweezer top is two consecutive candles with the same high at the end of a rise. The first candle makes a high, and the second candle makes the same high, but price does not go further. The two highs form a level that the market refused twice. The pattern is read as a sign that the rise is running out of steam.

The tweezer top is a two-candle pattern. The candles can be any colour, but the pattern is usually seen after a rise. The key is that the highs match. The match does not have to be exact to the tick, but it should be close. The pattern is weak evidence alone, and it should be read with other signs.

What a tweezer bottom is

A tweezer bottom is two consecutive candles with the same low at the end of a fall. The first candle makes a low, and the second candle makes the same low, but price does not go further. The two lows form a level that the market refused twice. The pattern is read as a sign that the fall is running out of steam.

The tweezer bottom is a two-candle pattern. The candles can be any colour, but the pattern is usually seen after a fall. The key is that the lows match. The match does not have to be exact to the tick, but it should be close. The pattern is weak evidence alone, and it should be read with other signs.

How exact the match must be

The match is a number, not a judgement. For a tweezer top (rule TB-2) an up candle and a down candle follow each other, each with a body of at least 0.5 ATR; their highs differ by at most 0.1 ATR and neither is below the highest high of the 5 sessions before the pair; and the pair comes after a rise, the close before it standing at least 3 ATR above the lowest close of the 10 sessions ending there. The tweezer bottom (rule TB-1) is the mirror: a down candle and an up candle, lows within 0.1 ATR, after a fall. The pair counts as formed when the second candle closes.

The ATR here is the average true range of the last 14 sessions. A difference of a few cents on a fund priced near 127 dollars is well inside 0.1 ATR; a difference of a dollar is not, and the pair is then not a tweezer.

Why it is weak evidence alone

A tweezer top or bottom is weak evidence alone because it is only two candles. Two candles with the same high or low can happen by chance. The pattern does not show a change in trend; it shows a pause. The market may have refused the level twice, but it may try again and break through.

The tweezer is a small pattern, and it should be read with other signs. A tweezer at a known support or resistance level is stronger than a tweezer in the middle of a range. The pattern is a hint, not a signal. It describes what price has already done, and it does not predict what it will do next.

The two pairs on the charts

The page carries two charts. The tweezer top is a pair on the SPDR gold fund (GLD): an up candle on 16 January 2018 with a high of 127.18 dollars and a down candle on 17 January with a high of 127.22, four cents apart, after a rise. The tweezer bottom is a pair on the same fund: a down candle on 7 July 2017 with a low of 114.80 and an up candle on 10 July with a low of 114.83, three cents apart, after a fall.

Each is the cleanest by the rule's own measure of the pairs found: rule TB-2 found seven tops in ten years across the two instruments and rule TB-1 found two bottoms. The charts show where the levels matched, not what the market did next.

What the tweezer cannot tell you

The tweezer cannot tell you whether the trend will reverse. It only shows that price refused a level twice. The next move may be up, down, or sideways. The tweezer also cannot tell you how far price will go if it does reverse. That is a question about the future, and the chart only has the past.

The tweezer is a description of what price has already done. It does not predict what price will do next. A pattern describes what price has already done and does not predict what it will do next. That is the plainest way to say it, and it applies to every pattern on this site.

What the count says

Rule TB-2 found seven tweezer tops (two on gold futures, five on the SPDR gold fund) and rule TB-1 found two tweezer bottoms (one on each). Nine pairs in ten years across two instruments is a short list, and a reader should not read it as a base rate for anything.

The pair has to match within a tenth of an ATR, and that tolerance, not any view of gold, is what keeps the list short.

The tweezer is a line in the sand, not a reversal signal by itself

On the gold chart, this level becomes a shelf. A shelf can hold for a few hours or for several days. If the third attempt also fails to close above the shelf, the level gains more weight. But a shelf is not a wall. It is only a line where orders were resting, and those orders can be pulled or filled.

The shadows of the two candles tell you how much pressure was behind each test

A tweezer top has two candles with equal highs, but the length of the upper shadows matters. If the first candle has a long shadow and the second has a short shadow, the first test met heavy selling and the second test met only a little. The second failure may be weaker evidence of resistance because fewer sellers were needed to stop the rise.

If both candles have long upper shadows, the sellers were active on both attempts. The high was rejected with force each time. That makes the level look stronger. But a long shadow is also a sign of volatility, and volatility can attract breakout traders who want to push through the level. The pattern alone does not tell you which group is larger.

For a tweezer bottom, the lower shadows work the same way. Two long lower shadows show that buyers stepped in at the same low twice. Two short shadows show that the low held with little effort. A trader who reads only the equal lows misses this difference. The shadow lengths are part of the pattern, not decoration.

The tweezer fails when the third test breaks the level, and the break is often fast

A level that has held twice becomes a target. Breakout traders watch it, and so do those who want to defend it. When the third test comes, the reaction is often sharp. If the level breaks, it may break quickly because the orders that were holding it have been consumed. The tweezer top then becomes a failed resistance, and the price can run above it.