After selecting the desired criteria, traders can apply the filter to the Finviz screener. Once the buyers have won out and caused prices to break above resistance, there is usually an influx of new buyers, resulting in higher volumes and increasing prices. This is known as the breakout phase and is what allows traders to capitalize on the move.

  1. Price consolidation occurs when there is a balance between buying and selling activities, which is often depicted by the pennant itself.
  2. The bullish pennant is a formation that signals the extension of an upward move in price.
  3. We have no knowledge of the level of money you are trading with or the level of risk you are taking with each trade.
  4. People come here to learn, hang out, practice, trade stocks, and more.
  5. The triangle is formed by two converging trend lines, with the price moving back and forth within the triangle.

The flag pole should have high volume, creating the flag pole to give more credence to the pattern’s strength. Research suggests that the longer the timeframe, the more reliable and accurate the chart pattern. Chart patterns on shorter timeframes from 1 to 10 minutes can be less accurate due to the outsize impact of block trades.

Tips for Trading Bullish Pennant Patterns

But we also like to teach you what’s beneath the Foundation of the stock market. We don’t care what your motivation is to get training in the stock market. If it’s money and wealth for material things, money to travel and build memories, or paying for your child’s education, it’s all good. We know that you’ll walk away from a stronger, more confident, and street-wise trader. Hence, consolidation that occurs in this trend is the tug of war between the two sides. Notice the indecision candles like doji candlesticks, dragonfly doji candlesticks, or even hammer candlesticks inside the consolidation period.

Following a Breakout, your goal is to ride with the increased momentum and mint profit from it. Whereas a Symmetrical Triangle is a larger pattern with a longer zone of consolidation. Put simply, a Pennant is a small pattern and a short-lived consolidation. You should only take a trade if the target gives you a favorable “Risk-to-Reward Ratio (R/R Ratio)”. The method of trading doesn’t change here as well (Did I state it too many times?). …The price gradually tightens and converges as the pattern develops.

Once the consolidation phase is over, the price typically breaks out of the channel and continues the upward trend. One of the major benefits of using AI-driven technical analysis tools like TrendSpider is the ability to backtest historical data. This allows traders to compare the performance of their strategy over different periods and markets. TrendSpider’s AI-driven algorithms also help traders identify the most reliable entry and exit points for patterns. A bullish pennant is a popular yet widely misunderstood technical analysis pattern characterized by a period of consolidation in the form of a symmetrical triangle. Generally, this pattern is regarded as a continuation pattern and appears after a sharp rally.

Tight Bull Flag

Now, that study includes all chart occurrences – both high probability and low probability versions. Poorly formed bullish consolidation patterns bring down overall performance. Key factors like the strength of the prior uptrend pole and the tightness of contraction impact outcomes. In technical analysis, pennants fall under the category of consolidation patterns signaling a balanced tug-of-war between buyers and sellers during an uptrend.

What is the Bull Pennant?

Considering the average change after the breakout is only 9%, it is not worth trading this pattern. Published research reveals a low success rate of 54% and a meager price increase of 7%. This implies pattern trading bullish pennants is as good as coin-flipping with unfavorable odds. A bull flag is a continuation pattern that typically forms after a sharp rally or decline as the market consolidates within two parallel trendlines.

Can Forex Trading Benefit from Bull Pennant Patterns?

By the end, you’ll understand the dynamics behind bullish pennants and how to implement basic bull pennant trading strategies. Pennant formations are short-term continuation patterns identified on price charts. They’re characterized by a small symmetrical triangle created by converging trendlines. Traders often use pennant formations to anticipate breakout points, with the height of the initial strong move providing an estimate for potential price targets.

The reason for this is that bearish, downward trending price moves are usually driven by investor fear and anxiety over falling prices. The further prices fall, the greater the urgency remaining investors feel to take action. When trading, it’s important to remember these facets of bearish and bullish pennants.

When to open a pennant position

Before you even think about becoming profitable, you’ll need to build a solid foundation. That’s what I help my students do every day — scanning the market, outlining trading plans, and answering any questions that come up. Even though the https://g-markets.net/ is a reliable pattern, it’s not foolproof.

Ultimately, there is a 68% chance of an upwards breakout as buyers take control. A descending triangle is a powerful technical analysis pattern with a predictive accuracy of 87%. The pattern is flexible and bull pennant can break out up or down, and it is a continuation or a reversal pattern. To identify a triple bottom chart pattern, look for three distinct lows in the security’s price that form a “VVV”-shaped pattern.

Remember that only some trades will be successful; however, technical analysis can help increase the success of the trade. Similarly, the flagpole shows a large volume coming (if there isn’t, the move is more suspect), while the pennant has a weakening volume, hence the formation. Most flag patterns slope in the opposite direction from the previous trend, but some can be horizontal and resemble a rectangle pattern. Keep in mind that the markets don’t always move in the way you expect which is why traders should always adopt prudent risk management. To account for this, only ever trade with capital that you can afford to lose. Once the filter has been applied, traders can then view the results on a chart interface.

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While both are continuation patterns, the main difference lies in their consolidation phase. A bull flag has a rectangular shape, while a pennant forms a triangle. One way to place a stop loss when trading this pattern is to put it on pennant resistance. This will help you manage your risk and protect your profits in case the breakout does not occur or the market reverses course.