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Pennant Chart Pattern

We have Explained how the Pennant chart Pattern Works with example. Pennants are called short-term continuation patterns mark as small consolidation. This occurs before resuming the previous move in the same direction. The formation occurs when there is a movement in security called flagpole followed by a consolidation period with converging trend lines. The traders pay close attention to pennants and flags while trading. Both are the same in structure, and take practice before an investor that tells difference between the two. These short-term patterns last only two to three weeks in length which is indicated by an initial volume. The strong volume increases at the end as the break out occur. Investors will use the pattern to figure out how high the stock will advance by taking the price at the bottom of the flag pole in the initial pattern and wait until the price consolidates.

After consolidated stock, it will break out at a higher level. If you take the price at the bottom and add it to the break-out price it will give the best indication of the future price action. Some traders don’t use pennants on their own but combine them with another technical analysis indicator as they don’t get faked out into making a bad trade. The attribute is important as it helps and makes spotting the pendant easy. The steep price direction goes up or down.

Pennant Chart Pattern

It needs several points over a short period. The bullish Pennant is formed after an uptrend and the bearish pennant is formed after a downtrend. Then the sideways period is followed by another sharp rise. So once the pole and a triangle are formed traders will watch for the price to breakout above the upper slanting trend line and enter a long trade. They are the same as flag during their consolidation period and last from one to three weeks. The volume at each period of the pennant is important. Here the initial move meets a large volume. The pennant should have weak volume during the breakout. Bullish Pennants are continuation candlestick patterns that occur in strong uptrends and formed from upward flagpole. Bearish Pennants are the opposite of the Bullish Pennant. They are continuation patterns and have flagpole a steep drop in price followed by a pause in the downward movement. This pause forms a triangular shape called Pennant.

Attributes

Pattern type : It is a Continuation

Indication :It is Bearish or bearish

Breakout Confirmation : The confirmation for the pattern is when there is a close above the upper trend line drawn across the high for a bullish pennant in a close below the lower trend line for a bearish pendant with above-average volume.

Measuring :Here we take the distance between the previous steep move leading into the pennant and add that to the breakout level.

Volume : The volume will decline during the formation, expanding on the breakout.

Conclusion

The top-performing pennant chart pattern has breakout near the yearly lows. It is formed when there is a large movement in security called flagpole followed by a consolidation period with converging trend lines. The pennant is followed by a breakout movement in the same direction as the initial large movement that represents the second half of the flagpole. They are used as a technical analysis tool. The volume in a pennant as the period of consolidation has lower volume and breakouts should occur on a high volume.