A Pennant Pattern is a type of continuation pattern formed in technical analysis when there is a large movement in a security, known as the flagpole, followed by a consolidation period with converging trend lines, known as the pennant, followed by a breakout movement in the same direction as the initial large movement, known as the second half of the flagpole.
The most important aspects :
You’ll notice the following while looking at a Pennant continuation pattern:
1.A flagpole: A Pennant pattern always starts with a flagpole, which sets it apart from other designs (such as the symmetrical triangle). The symmetrical triangle is preceded by the flagpole, which is the first powerful move.
2.Breakout levels: Two breakouts will occur, one near the end of the flagpole and the other after the consolidation phase, where the rising or negative trend will continue.
3.The Pennant: The Pennant is the triangle pattern generated between the flagpole and the breakout when the market consolidates. The triangle formed by the two converging trendlines is known as the Pennant.
Bullish Pennants are candlestick patterns that appear in strong uptrends. An upward flagpole, a consolidation phase, and finally the continuation of the uptrend following a breakout comprise the Pennant. Traders are looking for a break above the Pennant to profit from the resumed bullish trend.
Bearish pennant pattern:
The polar opposite of Bearish Pennants are Bullish Pennants. In powerful downtrends, bearish pennants are continuation patterns. They usually begin with a flagpole – a significant price drop followed by a stop in the downward trend. The Pennant is a triangular shape formed by this pause. After then, there is a breakthrough, and the downward trend continues. On a break below the pennant, traders try to begin short bets.
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