Pennant Pattern

Pennants are very similar to symmetrical triangles. But Pennants are typically smaller in size, indicating lower volatility and shorter duration. The pennants are similar to a flag except that it’s formed by converging, rather than parallel lines. Pennants can also be termed as Pointed Flags.

The volume at each period of the pennant is also important. The initial moves are usually accompanied by large volumes while the pennant formation period witnesses weakening volume, followed again by a large increase in volume during the breakout.

Most traders use pennants in combination with other forms of technical analysis to serve as confirmation.

Pennants are similar to flags in terms of the structure, have converging trend lines during their consolidation period and typically last from one to three weeks.

In a pennant, the price movement is characterized by converging trend lines, similar to those of a symmetrical triangles.

Pennants can also be classified as follows:-

Bullish Pennant Pattern
Bearish Pennant Pattern

In the case of both Pennants whether Bullish Pennants or Bearish Pennants, the original trend is likely to resume once the price breakout above the upper trend line, or breakdown below the lower trend line as the case may be.

Bullish Pennant Pattern

Bullish Pennant is almost identical or similar to a symmetrical triangle. A bullish pennant pattern forms after a sharp rise in stock prices. The only difference is the Time Span. The pennant usually does not last longer then three weeks. Because the pennant often happens at the mid point of a trend, we traders use to double the price span from the bottom to the highest point of the pennant for the initial profit target. To receive a valid breakout buy signal in a bullish pennant, we wait until three valleys are formed.

Bearish Pennant Pattern

A bearish pennant pattern forms after a sharp decline in stock prices. Bearish Pennant is also almost identical or similar to a symmetrical triangle. The only difference is the Time Span. The pennant usually does not last longer then three weeks. Because the pennant often happens at the mid point of a trend, we traders use to double the price span from the bottom to the highest point of the pennant for the initial profit target. To receive a valid breakdown sell signal in a bearish pennant, we wait until three valleys are formed.

Pennant Pattern Advantages of Charts pattern

Pennants are a type of continuation chart pattern.
Pennants can be bullish or bearish depending on the trend being formed.
Pennants are similar to flag charts in the sense that they have converging lines during a period of consolidation.
Pennants are sideways and horizontal in chart pattern.
After the breakout, prices should move in the same direction.
The volume should increase with the initial movement of this pattern formation, followed by a weakening in volume and then an increase in volume on a breakout.

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