Bullish pennant is one of the pennant patterns also known as the pennant pattern. Various terms found in the trading field. For those of you who are professionals in this matter, you may be familiar with the name bullish.

However, for those of you who are beginners, there may be some things that are still not understood. For that, this time we will discuss one of the terms of trading itself, namely bullish pennant. Well, this pennant pattern marks a price movement pattern that provides an overview or prediction of the possibility of continuing the trend direction (trend continuation pattern).

For more details about bullish pennant, you can read the following article. However, don't forget to follow our latest program, the 30% Welcome Bonus.

Understanding Bullish Pennant

Bullish pennant is a continuation of an uptrend. This pattern occurs when the price moves uptrend and is followed by a correction in the form of a triangle pattern that indicates consolidation. However, because the bullish sentiment is still sharp, the price will continue the uptrend by breaking through the resistance line of the triangle pattern.

What is a Pennant?

In technical analysis, a pennant is a type of continuation pattern that forms when there is a large move in a security, known as the flagpole. It is followed by a period of consolidation with converging trendlines—the pennant, and is also followed by a breakout move in the same direction. As the initial big move, which represents the second half of the flagpole. A pennant is a continuation pattern where this period of consolidation is followed by a breakout that is used in technical analysis. It is also important to look at the volume in the pennant during the consolidation period as it should have lower volume and the breakout should occur on higher volume. Most traders use pennants in conjunction with other forms of technical analysis that can be used as a form of confirmation. The pennant itself is a short consolidation pattern that appears in a strong price trend (the flagpole). It is triangular in shape, indicated by two converging trendlines, but the triangle lines can slope up, down, or even sideways. Most of the time, the slope will be against the trend of the flagpole. For example, if the flagpole sees a price increase, the pennant will often slope down like a small falling wedge. Pennants themselves tend to be short, a few days, but I allow for up to 3 weeks. Anything longer than that is better classified as a symmetrical triangle or wedge (ascending or descending). Active swing traders can use flags and pennants in their trading. Like flags, pennants function as half-stick patterns. The theory is that the price trend after the pennant will be as long or longer than the trend before the pennant.

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Understanding Pennant

Pennants, which are similar to flags in structure, have converging trendlines during their consolidation period and last anywhere from one to three weeks. Volume during each pennant period is also important. The initial move should be filled with heavy volume while the pennant should have weakening volume, followed by a large increase in volume during the breakout. Many traders look for ways to enter new long or short positions after a breakout of the pennant chart pattern. For example, a trader might see that a bullish pennant is forming and place a buy order just above the pennant’s upper trendline. When the security breaks out, the trader might look for above-average volume to confirm the pattern and hold the position until it reaches its price target. Most traders use pennants in conjunction with other chart patterns or technical indicators that serve as confirmation. For example, traders might notice the relative strength index (RSI) levels moderate during the consolidation phase and reach oversold levels, which could open the door for a potential move higher. Alternatively, consolidation may occur near a trendline resistance level, where a breakout could create new support.

What is Bullish Pennant?

Pennant pattern (flag pattern) is a breakout pattern that follows the main price trend and has a rectangular shape resembling a flag. This indicates that the trend will continue for a long period of time or will be reversed in a rapid movement. This bullish pennant pattern occurs when the price moves uptrend strongly, followed by a correction and a triangle pattern indicating consolidation, but because the bullish sentiment is still strong, the price continues the uptrend by breaking through the triangle resistance line. This consolidation occurs because some buyers take profit, while new buyers follow the market so that the price is pushed back up strongly and the uptrend continues. Entry buy can be done after the price breaks through the triangle resistance line, with a stop loss a few pips below the triangle support line. The target level or take profit is determined at least as many pips as the uptrend starts until the correction level (x) is completed, so that an adequate risk/reward ratio can be obtained.

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Bullish Pennant Pattern

This pennant pattern is a continuation pattern. The pennant shows a period of consolidation before (possibly) continuing the same trend with a breakout. The consolidation period should have lower volume with the breakout having to occur on higher volume. Some traders use the pennant pattern as an entry pattern to continue the current trend. It usually forms after a sharp price movement and can contain a gap commonly referred to as the pole or pennant pole. The pennant represents the time ahead. This pennant pattern will be busy and appear in the market when traders use it to predict future market movements. The bullish pennant pattern is a sign of a pause in price movement in the middle of a strong uptrend. This allows traders to buy and profit from the remaining price increase.

Characteristics of Pennant Pattern

When looking at the continuation pattern of this pennant, you will see several characteristics of the pennant itself, namely:
  1. Flagpole, the pennant pattern always starts with a flagpole. What distinguishes it from other types of patterns is that it looks like a symmetrical triangle. The flagpole is the initial strong move before the symmetrical triangle. Both the symmetrical triangle and the pennant have a cone-shaped body that forms during a period of consolidation. Price will consistently make higher lows and lower highs, creating two converging trendlines that form this cone shape. However, the pennant includes a flagpole at the beginning of the pattern, which is not present in the symmetrical triangle formation. The flagpole is a very important characteristic to use when price suddenly spikes or drops dramatically in the direction of the current trend, forming a nearly vertical line. This sharp move is accompanied by large volume and marks the beginning of an aggressive move in the current trend. Price then pauses, forming the body of the pennant, before breaking out in the direction of the trend with renewed strength.
  2. The breakout level that will be there are two types, one at the end of the flagpole, and another after the consolidation period, where the uptrend or downtrend will continue. For the flag or bullish pennant, the breakout above the resistance indicates that the previous increase has continued.
  3. And the last one is the pennant itself. A pennant is a triangle pattern that forms when the market is consolidating, between the flagpole and the breakout. These two converging trendlines will form a triangle or what is commonly called a Pennant.

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Bullish Pennant Flag

Flag is a small channel after a rally. The direction of the channel will be opposite to the direction of the rally. So, if there is a small down channel that appears after a bullish rally, it is called a bullish flag. Conversely, a small up channel that appears after a bearish rally is called a bearish flag. Because its shape resembles a flag, this is what makes it called a flag and its pole (flagpole). The flag pattern is another continuous pattern. Price movements will occur in a narrow range, indicating a consolidation pattern before the trend that occurred previously will continue. The bullish pennant flag is preceded by a high price movement that forms a higher high (HH) as if it were a pole. Which is then followed by a small price correction as if it resembles a flag. Technically, the foundation of the bull flag pattern is the higher high (HH) and higher low (HL) that's all. Higher high shows that buying traders are able to lift prices higher and higher low shows that buying traders are taking profits and prices fall slightly before finally prices continue to strengthen.

Pennant Volume

The variation in trading volume during the three phases of the pattern development can be used as a strong confirmation signal to identify a pennant pattern. The initial trend, the pole of the pattern is characterized by a high volume phase. After this initial phase, there is a consolidation phase that results in the development of the pennant, and very low trading volume. Finally, in the last part of the pattern, after the price breaks out of the pennant structure, there will be a large spike in trading volume again. As for the volume itself, it should be ‘heavy’ during the advance or decline that forms the flagpole. Heavy volume will give legitimacy to the sudden and sharp move, creating the flagpole. The expansion of volume on the break of resistance (support) gives confidence in the validity of the formation and the possibility of continuation. Although the flag and pennant are the main ones, the other characteristics should not be underestimated. It is important that the flag and pennant are preceded by a sharp advance or decline. Without this sharp move, the reliability of the formation will be questionable and the trade will carry additional risk. You can look for volume confirmation on the initial move, consolidation, and resumption to add to the solidity of the pattern identification. You can utilize volume readings from technical indicators such as ADX (Average Directional Index), On-Balance Volume Indicator (OBV) and others as a sign of confirmation.

Bullish Pennant Entry

There are also various methods to identify pennant patterns and understand the market psychology behind their formation. In the case of a bullish pennant pattern, you will trade with a bias to enter a long trade. Conversely, when trading a bearish pennant pattern, your bias is to sell or short-sell the security. There are several stages of strategy that can be done in the case of a bullish pennant. One of them is a bullish pennant entry. The bullish pennant entry strategy is a strategy that makes you see and enter a trade after there is confirmation at the end of the pennant or consolidation phase.

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Bullish Pennant Retest

For the strategy of determining the entry trade on the pennant pattern retest strategy, instead of trading immediately after the breakout, you can wait for the retest to occur. In essence, this is a more conservative approach to trading the pennant pattern, and is more suitable for traders who are risk averse. This is because, when trading this strategy, you will be more protected from false fraud that occurs very often. Retest will refer to the price reversing its direction after the breakout and returning to the breakout level. Many traders assume that if this movement occurs, then it is a strong indication that the breakout will persist. With this strategy, for both bullish and bearish trade entries, you need to find potential retest points after the breakout on the price chart that occurs. These retest points, once identified, then become your trade entry points.

Bullish Pennant Breakout

In this breakout pattern strategy, you will look to enter the trade after there is a confirmed breakout at the end of the pennant or consolidation phase. With a bullish pennant pattern, a sharp price move above the pennant is an indication that there will be a breakout and continuation of the uptrend. Therefore, you will enter a buy trade when the sharp price move breaks the pennant resistance line, so that you get some form of continuation signal of the trend using complementary analysis methods. Japanese candlestick patterns provide a strong confirmation signal for such trades.

Bullish Pennant vs Symmetrical Triangle

Previously for those who do not know what Symmetrical Triangle is is a chart pattern that represents a period of consolidation before the price is forced to breakout or breakdown. Breakdown from the lower trendline that marks the start of a new bearish trend, while breakout from the upper trendline that indicates the start of a new bullish trend. This pattern is also known as a wedge chart pattern. The difference between bullish pennant and symmetrical triangle can be seen below.
  1. Flagpole. Both symmetrical triangles and pennants have a cone shape that forms during a period of consolidation. Price consistently makes higher lows and lower highs, creating two converging trendlines that form this cone shape. However, a pennant will include a flagpole at the beginning of the pattern, which is absent in a symmetrical triangle formation. The flagpole is a very important characteristic of a pennant and is created when price suddenly spikes or drops dramatically in the current trend, forming a nearly vertical line. This sharp move is accompanied by heavy volume and marks the beginning of an aggressive move in the current trend. Price then pauses, forming the body of the pennant before breaking out in the direction of the trend with renewed force.
  2. Duration. The second difference between a symmetrical triangle and a pennant is their duration. Pennants are considered short-term patterns that form over a period of days or perhaps weeks. Triangles can take much longer, sometimes forming over months or years. In fact, if a pennant pattern continues into its 12th or 13th week it is usually considered to have become a triangle. The breakout after a pennant pattern should occur near the point where the trendlines meet, which is referred to as the apex. However, when dealing with a symmetrical triangle, it is optimal to break above or below the trendline halfway to three-quarters of the way through the pattern. This means that the pattern often does not reach its apex, forming a flat-topped cone rather than a true triangle. The breakout is eventually forced one way or another as price approaches the apex. However, a breakout that is too early or too late may indicate a weaker pattern and less strong continuation.

Bullish Pennant vs Bearish Pennant

When trading, the same approach can be applied to both bearish and bullish pennant patterns. However, a bullish pennant will have a long bias while a bearish pennant will have a short bias. A bullish pennant is a continuation candlestick pattern that occurs in a strong uptrend. The pennant is formed by an upward flagpole, a period of consolidation and then a continuation of the uptrend after a breakout. Traders look for a breakout above the pennant to capitalize on the renewed bullish momentum. The bearish pennant is the opposite of the bullish pennant, which is a continuation pattern that occurs in a strong downtrend. It usually starts with a flagpole, then a sharp price drop, followed by a pause in the downward movement. The pause forms a triangle. Then there is a breakout so that the downward movement continues. Traders look for this to enter a short trade on a break below the pennant.

How to Identify a Bullish Pennant

As shown above, before the flag-like pennant formed, price had made a sharp rise. This is known as the pennant’s ‘pole’. The pole can represent the start or continuation of an uptrend and its size is important when you are calculating where to place your profit target for your long trade. The triangular pennant itself is usually very small in relation to the size of the overall uptrend so this pattern can be difficult to spot. However, with practice, you will learn when to look for it and how to recognize it.

How to Trade Bullish Pennant

There are two methods that can be chosen when trading using a bullish pennant, the first is to wait until the market breaks above the resistance line. And the second is by using the general rule that the market will often reverse briefly before the breakout begins. For the bullish pennant pattern, you can make a buy entry after the price breaks through the triangle resistance line with a stop loss a few pips below the triangle support line. The target level is determined by the pip at the start of the uptrend until the completion of the correction level. After learning what a bullish pennant is, patterns, characteristics, and others, you can also learn other things about this bullish through several other media. It should also be noted that before trading, you are expected to continue to learn more about several strategies for this trading. For example, it can be seen in the example below.

How to trade Bullish Pennant: method 1

  • The first step is to enter your trade. Enter your long trade as soon as the candlestick closes above the upper trendline of the pennant. See the chart below for an example of this:

  1. pattern pole
  2. Buy order (long entry)
  • Place your stop loss. Place your stop loss on the other side of the pennant, just below the lower trendline. See the chart below for an example of this:

 

  1. tiang pola
  2. Buy order (long entry)
  3. Hentikan kerugian
  • Place your profit target. Measure the initial price increase (the pennant pole) before the market begins to consolidate. Then place your profit target the same distance above the pennant breakout point. If, for example, the initial price increase was 50 pips, you should place your profit target 50 pips above your trade entry. See the chart below for an example of this:

  1. pattern pole
  2. Target profit distance (same height as pole number_1)
  1. Buy order (long entry)
  2. Stop loss
  3. Take advantage

How to trade bullish pennant: method 2

  • Enter your trade. Like method 1, wait for price to rise above the upper trendline of the pennant. Once this resistance is broken, place a buy order as soon as price retests the trendline – the broken resistance will now become a support level. See the chart below for an example of this:

  1. pattern pole
  2. The area where the resistance line has turned into support
  1. Buy order (long entry), after the price bounces off the trend line
  • Place your stop loss. Place your stop loss below the new support area. See the chart below for an example of this:

  1. pattern pole
  2. The area where the resistance line has turned into support
  1. Buy order (long entry), after the price bounces off the trend line
  2. Stop loss below new support area
  • Place your profit target. Like method 1, measure the size of the pennant pole. Then place your profit target the same distance above the pennant breakout (where you entered the trade). See the chart below for an example of this:


  1. pattern pole
  2. The area where the resistance line has turned into support
  3. Take profit distance (same height as pole 1)
  4. Buy order (long entry), after the price bounces off the trend line
  5. Stop loss below new support area
  6. Take profit level
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