What is a pennant: How to Identify a Bearish Pennant and Take Advantage of It DTTW

As per this what is etoro, the respective asset will exhibit a substantial movement in its price after the consolidation period is over. An ascending triangle chart pattern is a bullish technical pattern that typically signals the continuation of an uptrend. They can signal a coming bullish breakout above an area of resistance after it has been tested several times. This is a small symmetrical triangle that forms as the market consolidates. It is important to note that the pennant should formed after an uptrend has already begun, not before.

If the price breaks below the support line of the pennant, this indicates that sellers are in control and a bearish reversal is imminent. When the breakout direction is confirmed, you will see that volume starts to surge as buyers are rushing in to push the price higher. You will see this formation when prices stall out and start moving sideways after a strong uptrend. BlackBull Markets is a reliable and well-respected trading platform that provides its customers with high-quality access to a wide range of asset groups.

What Is a Pennant Chart Pattern in Technical Analysis?

The price is contained by a small symmetrical triangle that begins wide and converges to a point as the pattern develops. One of the most important things to note when trading this pattern is to wait for the breakout from consolidation before entering a trade. This will help you avoid false breakouts and ensure that you are getting into the trade at a good price.

If you miss the bhttps://forexbitcoin.info/ initial move first thing in the morning you can always sit back and wait for one of these patterns to take place for a continuation. As you can see from the EUR/USD chart above, the throwback never took place, which is not surprising given the overall strength of the initial uptrend. As a matter of fact, they created ten consecutive bullish candles on an hourly chart. The consolidation phase must stem from an uptrend, otherwise it’s just a normal triangle.

Trading the Bull Pennant Pattern

If the pattern isn’t setting properly with a defined pattern, increased volume, etc. then you need to move along. There are plenty of these setups happening everyday so there is no sense it trying to force it. The first stop could be a close back inside the consolidation zone marked off by the trends lines. The second stop, which is what we use most, is just below the low in the pullback. The second stop helps filter out any noise like a quick drop back into the consolidation zone before popping back up which would trigger the first possible exit point. These patterns exhibit a continuation of the downward or upward trend.

This triangle usually happens when bulls and bears battle about the movement of an asset. As they battle, the price tends to consolidate between several levels. With both strategies, your stop is far closer than the point at which you take profit. This is one reason why pennants are so sought after by traders – relative to other patterns, the risk-reward ratio tends to be high. For our EUR/USD trade, for example, you might be risking 10 or 20 points in exchange for 200 points of potential profit. The volume at each stage is also important to the success of a pennant pattern.

Either way, the purpose of these triangle flags has essentially remained the same. True, it no longer has that purpose of scaring the enemy, but there is that one about celebrating an achievement. Be it another year around the sun, a football victory, or the success and pride of founding a company, pennant flags are there to convey the right spirit. Some felt pennants or other fabric pennant flags are even seen with a multicolor pattern.

What is the Bearish Pennant?

A “reversal breakdown” can occur anytime if prices start to fall, breaking through the lower trend line. Bull traps often occur at the end of a downtrend, when prices make a sudden leap. This leads many traders to believe that the price has bottomed out. Well, you should be aware that a breakdown may happen if there’s a significant bearish event that affects the market sentiment. The price target for this setup is calculated by adding the height of the pole to the breakout point.

Now that you know the meaning of the pennant chart pattern, let’s shift our focus to its other aspects. A breakout – a break of the upper trend line activates the pattern, while a break of the supporting line invalidates the formation. In this case, wait for a close below diagonal support resistance level.

The initial price that forms the first flagpole, should be supported with large volume. Short-term continuation patterns that mark a small consolidation before the previous move resumes. Nautical pennants were the original triangular or tapered flags, and they are still flown on most active warships. Sporting pennants also have a long history, and were once commonly given as prizes or trophies and waved by fans in the stands at high school and college sporting events. Sports teams can still win a pennant, but pennants are often purchased as souvenirs at games and wind up on fans’ walls.

Traders could have watched for a breakout from these levels as a buying opportunity and profited from the subsequent breakout. League championships are not decided in the regular season, but divisional champions are. Some teams hang flags or pennants just for winning their division. Teams are fighting for playoff positioning in the last portion of the season instead of a championship. The month of September is usually the peak of the pennant race. When trading these setups you’ll want to wait and make sure the breakout candle closes above the resistance/support level to confirm the move.

Unlike the flagwhere the price action consolidates within the two parallel lines, the pennant uses two converging lines for consolidation until the breakout occurs. You can easily confuse this chart pattern with the bull pennant – especially as the price action looks very similar in the consolidation phase. The formation of a bullish flag is almost identical to the bullish pennant, except that it is formed by two parallel trendlines that form a small rectangle. As you can see from the chart of Bitcoin (BTC/USDT), the price action forms a flag-pole top at around $42,000 before sloping down slightly at a 45-degree angle. However, in most times, a bearish trend is usually interrupted by a few periods of bullishness.

A breakout occurs when the stock’s price breaks out of the pennant’s resistance. If you are a conservative trader, you can wait for the breakout candle to close before entering the trade. There must be an existing uptrend before this pattern can form. This is because the pattern is a continuation signal and reflects the underlying bullish sentiment in the market. The uptrend is often characterized by formation of higher highs and higher lows as the stock breaks market structure to the upside. The bearish pennant is typically seen as a bearish continuation pattern, as it indicates that prices are likely to fall further after the consolidation period is over.

Volume during the consolidation period is diminishing as traders become uncertain of the direction of the market. The flagpole is the vertical distance between the highest peak and lowest trough. It is created by a sharp increase in price, followed by a period of consolidation. When this happens, some traders will wait for a potential retest of the trendline from where price broke out of, and then enter a trade.

The initial take profit should be at the lower side of the pennant hoist. The bullish pennant pattern can occur over lots of different time frames. Day traders look for them on second or minute charts, while longer-term traders spot ones that arise over weeks or even months.

It’s important to look at the volume in a pennant—the period of consolidation should have lower volume and the breakouts should occur on higher volume. On the other end of it, you have the playoffs and the race for the pennant. Teams are recognized with a banner and rings for their players when they win the pennant. The Yankees and Dodgers have dominated in terms of winning pennants, but young talent has new teams threatening. It is a big deal to win the pennant, so diamond rings are deserved. As you can see in the chart above, Apple shares ($AAPL) took off at the open with a slight pullback; creating a perfect example of a bull flag pattern.

To buy or sell pennants, you’ll need to plan when to open your position, take a profit and cut a loss. The Structured Query Language comprises several different data types that allow it to store different types of information… Pennant performance strongly depends on the initial price change as defined by the pennant’s pole. Whether the trend reverses or continues based on the pattern heavily depends on the context of the pattern. Learn how to trade forex in a fun and easy-to-understand format. A flag that symbolizes the championship of a league, especially a professional baseball league.

• As per this pattern, the respective asset will exhibit a substantial movement in its price after the consolidation period is over.
• Discover the range of markets and learn how they work – with IG Academy’s online course.
• There are plenty of these setups happening everyday so there is no sense it trying to force it.
• In most cases, you can place a stoploss order below recent lows.

It’s important not to confuse bullish pennants with other patterns such as triangles, falling wedges and bullish flags. Bearish pennants and bullish pennants can indicate that major price action is on the cards – so understanding them is crucial for any technical trader. Here’s an introduction to how pennants work, and how to trade them. The exit direction of a pennant pattern depends on the movement that preceded it.