A tweezer top is a feature of charts that depict trading trends on commodities and stock markets. This kind of feature is only evident on the charts that use a type of bar graph depicting each day's trend with an individual bar, which is usually called a candlestick. The candlesticks are generally color coded with one color denoting an upward trend in the price and another indicating a downward trend in the price. A tweezer top occurs when the trend goes up one day, reaching a peak and then reverses the following day. The two opposite candlesticks on the chart together are termed a tweezer top.
When compiling the pricing trend charts for stocks, options and other traded commodities, each day's trend is depicted by a bar called a candlestick. If the price at the end of a particular day is higher than the price at the beginning of the day, the candlestick is seen to go up and if the price at the end of the day is lower, the candlestick extends downward. The following day's candlestick begins at the chart exactly at the point at which the previous day's candlestick ended. By graphing the candlesticks and color coding them for up and down trends, a trend chart can show at a glance the daily price history for a particular commodity or stock.
Commodity, option, and stock traders use the terms bullish and bearish to describe upward and downward market trends. When more buyers than sellers trade a particular commodity or stock, it causes the price to rise, which is called a bullish trend. When sellers outnumber buyers, it causes the price of the commodity to fall and is called a bearish trend. A tweezer top is a place on a chart depicting the daily trends for a commodity or stock that has a strong bullish day followed by a strongly bearish day. The upward trend on the bullish day is usually notable for some reason such as a peak of some kind, like a monthly high price for that commodity, and the bearish trend on the following day is often equally as dramatic.
Traders analyze trend charts and look for features such as tweezer tops and their opposite, tweezer bottoms, as well as other patterns and features to predict future trends. These features are only one of many tools they use, and no trader would base a decision solely on such data. Tweezer tops and bottoms at the end of long upwards or downward trends can sometimes indicate an increased possibility of a steady reversal in the trend, although this is a generalization rather than a hard and fast rule.
