1. A method for identifying and processing patches indicative of touch events from a plurality of pixels having touch values captured during a scan of a touch sensor panel, comprising: eliminating pixels having touch values indicative of no touch events prior to performing a watershed algorithm; performing the watershed algorithm on non-eliminated pixels to identify the patches, wherein each iteration of the watershed algorithm starts from an unlabeled non-eliminated pixel and traces a path through other unlabeled pixels of increasing touch value until a pixel labeled with a patch number is found, at which time all pixels in the path are labeled with the same patch number as the labeled pixel, or a peak is found, at which time the peak is assigned a unique patch number and all pixels in the path are labeled with the unique patch number, the peak being an unlabeled pixel having the highest touch value among its neighboring pixels; and performing a post-watershed merge of two or more identified patches as determined by the labeled pixels.