Bull Pennant Patterns Complete Trading Guide

A characteristic feature of the pennant is an impulse movement, after which the stage of price consolidation in a narrowing triangle begins. At the same time, there is a decline in trading volumes for the instrument. Upon reaching a narrow range, there is an intense price breakout in the trend direction with increasing volumes. The second one occurs after the currency pair price trades within a price range between the resistance and support levels for some time. Therefore, when reviewing flag and pennant patterns you can look to see how the price action is trending relative to the Ichimoku Cloud.

Definition of Flags and Pennants

A continuation pattern is a chart pattern that leads to the continuation of an existing trend. The initial price that forms the first flagpole, should be supported with large volume. Continuation patterns indicate a pause in a trend and indicate that the previous direction will resume after a period of time. HowToTrade.com takes no responsibility for loss incurred as a result of the content provided inside our Trading Academy. By signing up as a member you acknowledge that we are not providing financial advice and that you are making the decision on the trades you place in the markets.

Trade major, minor and exotic pairs with excellent trading conditions.

Just like the bullish pennant, this also can take a long time to form a consolidation. Within this time, there is the possibility of reversals forming in the trend that can affect the trades. So, the best thing to do is to enter the trade before the breakout occurs.

In some cases, with a protracted downtrend, the pattern signals a bearish-to-bullish reversal. A bullish pennant, on the other hand, is also formed after a strong upward move in price, but instead of a flag, the consolidation phase is marked by a symmetrical triangle pattern. The triangle is formed by two converging trend lines, with the price moving back and forth within the triangle. Once the triangle pattern is complete, the price typically breaks out of the triangle and continues the upward trend. The good thing about pennant patterns is that trading using either the bullish or how to trade bearish and bullish pennants the bearish is similar and the same approach works on both of them. The only difference here is while bullish pennants will have a long bias, the Bearish Pennants tend to have a short bias.

Can pennant formations signal both continuation and reversal patterns?

Aggressive and risky traders often take long trades at the close of the breakout candle and risk averse traders will wait for a retest of this broken neckline. In this example, we also get to see a fake out that occurred out of the bearish pennant/symmetrical triangle. When taken in view of the larger chart pattern, the bearish pennant, the fakeout could have been easily avoided.

1. The good thing about pennant patterns is that trading using either the bullish or the bearish is similar and the same approach works on both of them.
2. A more gradually sloping wedge sometimes leads to a gradual decline, while a steep wedge could result in a sharp sell-off.
3. For the trade setup, you could place a buy order on a break of the high, with a stop below the low of the range.
4. The corrective second drive makes traders question the sustainability of the trend.
5. If you spot them right, bullish pennant and bearish pennant could give you a strategic edge over other traders and investors in the market.
6. A pennant pattern indicates a pause in the market after a strong directional movement.

The second higher peak reflects slower buying momentum and profit-taking. The third peak indicates buyers have been fully absorbed and sellers take control, pushing the price down and resulting in a trend reversal. Here, there is a neckline that is supposed to be broken for momentum towards the upside.

1. As you can see, the drop resumed after the price made a breakout to the bottom.
2. It is formed over a shorter duration than some chart formations and is typically seen in more aggressive trading environments.
3. The initial move must be met with large volume while the pennant should have weakening volume, followed by a large increase in volume during the breakout.
4. Unexpected announcements, geopolitical events, or economic data releases can quickly change market sentiment, rendering the pennant pattern obsolete.
5. The three drives pattern reflects the psychology of the market participants.

Spikes in this chart reflect market over-reactions driven by emotions like fear, greed or surprise news. For example, negative spikes with long lower wicks signal panic selling while positive spikes with long upper wicks show euphoric buying. In both cases, the price is swiftly rejected back to normal levels as emotions subside.

This resistance level is where the price struggles to break above, reinforcing the bearish sentiment when it fails to do so. GEECEE Ventures Ltd’s price action has been on an impressive uptrend in recent months, forming a series of higher highs and higher lows on the daily chart. Most recently, the stock broke out above its previous all-time high of Rs 265, indicating strong bullish momentum. The Scallop pattern is a technical charting pattern indicating a market is headed up or down with increasing volatility but no clear direction. The Scallop pattern appears as a series of higher highs and lower lows that form a symmetrical, rounded channel resembling the shape of a scallop shell. For traders who spot this pattern, the typical entry would be after the second retracement on confirmation of the upturn.

Use a stop market sell order or stop limit sell order when managing bullish pennant pattern risk. A bearish pennant pattern price target is set by measuring the height of the flagpole and subtracing this number from the short trade entry price to generate the trade exit point. The bullish pennant pattern entry point is when the market price penetrates the pattern resistance area on rising buyer volume.

This is where price tends to take a pause before continuing in the original direction of the trend. A pennant pattern is a pattern in technical analysis that forms when there is a large bullish or bearish trend and a price consolidation. The pennant pattern signals a continuation of an underlying price trend after a pattern breakout. The pennant pattern consists of a flagpole and converging trendlines with the converging trendlines indicating a temporary pause before the resumption of the previous trend. The main benefit of chart patterns is that they provide a visual representation of past price action, which offers insight into potential future price movement.

Price is expected to retest this stair and continue its trajectory towards upside. Observe the example above to study how price forms an upward to continue its trend towards upside. The ascending staircase pattern is a bullish chart pattern that resembles a staircase, with higher highs and higher lows. Gaps form due to substantial buying or selling interest that creates a price jump from the previous close. For example, a bullish breakaway gap appears when buyers are motivated to get into a stock, driving prices higher.