🐾 Pennant Pattern 🐾
A pennant is a continuation pattern used by traders to forecast upcoming market movements. This pattern resembles a triangle formation, but there are several important differences between them that are worth knowing.
A pennant pattern is a continuation formation that occurs after a significant upward or downward movement, followed by a brief consolidation period, and then the movement continues in the original direction. It appears as a small symmetrical triangle made up of multiple candlesticks. Depending on the trend direction, the pennant pattern can be bullish or bearish.
Features of the pennant pattern:
- Flagpole: The formation of a pennant always begins with a flagpole, which distinguishes it from similar patterns (such as the symmetrical triangle). The flagpole is the initial strong movement preceding the appearance of the symmetrical triangle on the chart.
- Breakout levels: In fact, there are two breakout points in the pattern; one at the end of the flagpole and another (arguably the main one) at the end of the consolidation period, after which the upward or downward trend continues.
- The pennant itself: The pennant is a triangular formation formed during the market consolidation between the flagpole and the main breakout. Two converging trend lines form the triangle - the pennant.
Bullish Pennant
A bullish pennant is a candlestick continuation pattern that appears during strong upward trends. The pennant is formed from an upward flagpole, a consolidation period, a subsequent breakout, and a continuation of the upward trend. Traders anticipate a bullish breakout above the resistance level to capitalize on the renewed bullish momentum and open a profitable trade.
