Pennants, which are similar to flags in terms of structure, have converging trend lines during their consolidation period and last from one to three weeks. The volume at each period of the pennant is also important. The initial move must be met with large volume while the pennant should have weakening volume, followed by a large increase in volume during What is Commodity Trading the breakout. Flag and pennant patterns could prove to be profitable strategies, but you have to know what to look for, and your timing must be near perfect. Additionally, you’ll need to know how to properly risk manage and set stop losses, in case the pennant pattern fails. If you take a look at the chart above, you’ll notice some annotations.

The rebound from support could be enough momentum to push the cryptocurrency higher toward $15,000. Here’s the current price action as it is developing, and what could result. Stefan has been writing articles for DCForecasts since 2016 in-house full time. As one of our main cryptocurrency writers, he focuses on covering the latest cryptocurrency news, technical charts, price analyses of coins and press releases. When he is not exploring and covering the latest topics in crypto, you can find Stefan playing basketball, tennis or cycling. Finally, we have an example of a bearish flag on the XRP/USD 15-minute chart below.

However, the pennant pattern forms a triangle-like shape. Similarly, you might see the stock trend higher, or have a sharp move before consolidating, then either break higher, or lower, depending on whether it’s a bullish or bearish pennant. There are plenty of patterns technical traders see in the markets. We’ll focus on the more common trend continuation patterns—bull flags, pennants, and ascending triangles—and bull pennant explore what they might be signaling in the markets. We’ll also go over basic setups that make them tradable. Most traders use pennants in conjunction with other chart patterns or technical indicators that serve as confirmation. For example, traders may watch for relative strength index levels to moderate during the consolidation phase and reach oversold levels, which opens the door for a potential move higher.

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The targeted move is measured from the high of the lowest day in the “V” bottom. The All Ordinaries exhibited a pennant during a strong up-trend in October 2001. This will give you an idea of how subjective pattern identification can be. A flag forms with parallel lines counter to the down-trend. Investing and Trading involves significant financial risk and is not suitable for everyone.

A drop in closing price that breaks the lowest low of the pennant signals a violation of the pennant formation and possibly a change in trend. Price highs move slightly lower and price lows move slightly higher. Drawing a trend line connecting price highs and then another connecting price lows form two converging lines which are an identifying feature of the pennant.

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This content is not financial advice and it is not a recommendation to buy or sell any cryptocurrency or engage in any trading or other activities. You must not rely on this content for any financial decisions. Acquiring, trading, and otherwise transacting with cryptocurrency involves significant risks. We strongly advise our readers to conduct their own independent research before engaging in any such activities. Following the impulse move, BTC corrects into a triangular pennant formation before experiencing a 20% breakdown to 4,200 USD. Finally, BTC experiences one more breakout from 3,986-4,188 USD before a large retracement down to the 0.5 Fibonacci level. Flags represent short channels, as their slope is in the opposite direction compared to that of the prior trend.

We do not track the typical results of our current or past students. As a provider of educational courses, we do not have access to the personal trading accounts or brokerage statements of our customers. One stock that has blown through any COVID concerns is mobile payments company Square, which made several new all-time highs in the early summer of 2020.

In both cases, the trend is expected to continue when the price moves above the upper trendline. A pennant chart pattern is a technical analysis term that refers to a chart pattern which occurs when the trading range formed by successive highs and lows narrows over time.

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The entry is placed at a price where the breakout closes, while the stop loss is located just below the breakout candle and the wedge. A formation that checks all three boxes with a correction ending at around 38.2% is a textbook bullish pennant pattern. The shorter and milder the correction, the stronger the uptrend and the ultimate breakout usually is. Unlike the flagwhere the price action consolidates within the two parallel lines, the pennant uses two converging lines for consolidation until the breakout occurs.

The patterns are characterized by a clear direction of the price trend, followed by a consolidation and rangebound movement, which is then followed by a resumption of the trend. They are continuation patterns, and forms when the prices of stocks rallies sharply. It has a small consolidation period before resuming it’s move up or down. Next Watch our video above to learn how to identify bull pennant patterns.Bull pennants are similar to bull flags. Day traders in particular love the bull pennant pattern. It’s one of the most popular patterns out there for long bias traders. A bullish pennant is a technical trading pattern that indicates the impending continuation of a strong upward price move.

There is a high degree of risk in trading and you should always consult a qualified advisor about the suitability of any investment. All our products include full support and updates for at least 1 year so if you have any problems or require any additional information you can contact us for assistance. Can be applied within TradeStation using various tools, including charts, RadarScreens and scanner. Traditionally the move out of the pennant is thought to be potentially as big in magnitude as the uptrend before the pennant begins.

Pennant patterns are rare, and if you happen to see one, you’ll notice it looks like a symmetrical triangle pattern, but one that can tilt either up, down, or sideways. Ratio – shows where the current price is in relation to the flag or pennant. A value between 0-1 means that the current https://g-markets.net/ price is inside the flag or pennant with 0 being the base of the flag or pennant and 1 being the top of the flag or pennant. A ratio value below 0 means price is currently below the flag or pennant and a ratio value above 1 means price is currently above the flag or pennant.

• Indeed because this post is all about bull pennants we’ll be discussing the bullish side of the street.
• Swing traders often take advantage of a multi-day bull flag patterns.
• The best way to illustrate a bullish pennant formation is by displaying it on a stock chart.
• As you see, the price reverses afterward, which would have created unpleasant conditions for the long trade.

Unlike trading other chart patterns, the original range of a pennant is rarely used to plan where to take profit. Instead, the breakout often matches the size of the bear or bull move that preceded the consolidation. To identify a bullish pennant, you’ll need to watch for two elements.

The distance is calculated to the lowest low recorded in the flag or pennant pattern and then projected down from the point of breakout . Jack Schwager (Schwager on Futures – Technical Analysis) says that he finds flags that slope in the direction of the trend just as reliable. The best way to illustrate a bullish pennant formation is by displaying it on a stock chart. Below is an example of a bullish pennant on a daily chart. Price reaches a level where profit-taking begins and starts to move lower.

In an up-trend, the targeted move is measured from the start point of the trend to the highest high recorded in the flag or pennant pattern. The move is then projected up from the point of breakout , to arrive at the target. Similar to a bull flag, the consolidation phase shouldn’t surpass the 50% Fibonacci retracement of the prior leg higher . A pullback that extends below 50% signals that the uptrend is not as strong as it should be. Hence, a strong bull pennant corrects to around 38.2% before breaking the upper trend line. Following the establishment of a short-term peak, the price action starts to consolidate below the highs. Two converging lines connect the higher lows and the lower highs, until these two intersect.

Bitcoin eyes $26,000 with a Liquidity risk breakout forming on the lower timeframe chart as we are reading more in the latest Bitcoin news. Flag and pennant price targets shouldn’t be taken too seriously. Build in a buffer zone that works with both the asset and timeframe being traded. The bull flag is formed with a strong 11% move from 3,350-3,710 USD. After the bull flag, BTC makes another strong 7.4% move up from 3,710-3,986 USD, which is followed by a pennant formation. After a rectangular consolidation pattern, ETH experiences a breakout and makes a 3.6% move from 154. Here’s an example of a bull flag on the ETH/USD 15-minute chart.

– If the breakout you’ve anticipated occurs with high volume, it’s a good sign that you’ve found a profitable trade. Always keep an eye on volume levels when trading technical patterns. A pennant forms below the resistance line – a strong bullish signal as the stock has entered a congestion pattern rather than a correction. The breakout at is in the opposite direction to that expected. On the chart above, price breaks out after a 13 day consolidation period. This breakout point starts the beginning of the flagpole.

Learning to spot technical patterns before prices begin to move is one of the most critical aspects of day trading. In a down-trend, the targeted move is measured from the start of the down-trend .