Place caramels and water together in microwave safe container. Heat in microwave in thirty second intervals stirring in between until caramel is fully melted and smooth. Pour into a canning jar for easy dipping. Let cool for five minutes.
Carefully dip pretzel rod into caramel leaving two inches at the end free for the handle. Gently tap off extra. Use a silicone spatula to smooth if needed. Place on parchment paper.
Repeat until all pretzels are coated with caramel. If you notice the caramel puddling under the pretzel, use less the next time. The caramel will stick to the parchment paper until it is totally set up. Once set, it will easily release. You can trim away excess caramel if need be.
Let caramel set up fully.
Melt chocolate candy coating according to package directions. Pour into a canning jar for easy dipping.
Dip pretzels into melted chocolate and tap off excess. Sprinkle on desired sprinkles and/or candy. Place on parchment paper to set up.