The figure “Pennant” is, as well as the pattern “Flag“, a signal to continue the trend after some stop. The appearance of a figure is somewhat reminiscent of a triangle, or rather one of its varieties, called “symmetrical triangle”.
However, a significant difference from the similar pattern is the fact that the formation of the “Pennant” takes much less time than the formation of the “Triangle“.
In addition, the “Pennant” in its some characteristics is similar to the figure of the “Flag”. It also indicates the continuation of the main direction of the price movement.
However, unlike the pattern “Flag” Pennant’s local support and resistance levels are not parallel to each other and converge at one point. Pennant may be either bullish (i.e., formed in the growing market) or bearish (its formation happens in a downward market).
It should also be noted that the graphic analysis pattern “pennant” has a slight slope in the opposite direction to the current trend. Therefore, it is possible to determine the future direction of price movement by the presence of a so-called flagpole, i.e. preceding the formation of the pennant of the trend.
The most important thing for a trader is to be able to identify what kind of shape is formed on the graph correctly because you can easily confuse “pennant” with the “triangle”, for example. In order to prevent this, it is necessary to pay attention to the existence of the flagpole, as well as the time that is spent for the price forming.
After the graphic figure “Pennant” was formed, the price usually breaks the resistance level (the top line, which is held on the highs) and the trend resumes. This graphic figure represents a little respite, which the bulls take (during the growing trend) or bears do (in a downtrend). This respite is associated with the appearance of balance in the number of buyers and traders, as well as fixing the transactions. But do not forget that when working this figure off, the price rushes downstream of the main trend that marks the end of temporary price consolidation period.
This graph pattern can be formed at different time scales, so the use of strategies may be both short and long termed.
That’s all for now. Got any questions? Just ask the expert!