Friday, July 19, 2024

Pennant

The pennant is basically a variation of the flag pattern where the consolidation area has converging trend lines, similar to a triangle.

The pennant is a neutral form. Whether the trend reverses or continues based on the pattern depends largely on the background of the pattern.

After a steep trend, it appears as a small wedge and moves in the opposite direction.

After an uptrend, it has a downward slope, and after a downtrend, it has an upward slope

Pennants are generally a pattern trading method based on continuation patterns.

A pennant is a price pattern in which prices begin to fluctuate and the difference between peaks and troughs begins to shrink in a horizontal manner and displays similar characteristics to a symmetrical triangle.

When price breaks out of this pattern, it usually continues in the same direction without any signs of confusion as to where it should be.

The

Pennant is a continuation chart pattern that forms when there is a large price move, described as “First Flagpole “, followed by a consolidation period in which trend lines converge, described as “” Pennant “, followed by a breakthrough in the same direction as the initial big move, which can be said to be “The second flagpole “.

A pennant is a small, symmetrical triangle that starts out wide and converges (like a cone) as the pattern matures.

The continuation pattern indicates a pause in the trend and indicates that it will resume its previous direction after a period of time.

The pennant is triangular in shape, but much smaller.

While a triangle has swing highs and lows as price moves back and forth, a pennant’s price action will be limited to a range or consolidation that becomes more volatile over time. smaller.

Pennants appear before sharp price increases or decreases, indicating that the market is taking a break before potentially resuming its trend.

Short-term continuation pattern, marking a slight consolidation before the previous trend resumes.

These patterns usually precede a sharp increase or decrease in volume,

A pennant is similar in structure to a flag, having a converging trendline during consolidation.

The size of the pennant is important.

The initial price that forms the first flagpole should be supported by a large amount of trading volume.

The pennant should see a weakening in volume, followed by a sharp increase in volume during the breakout.

Continuation patterns are chart patterns that lead to a continuation of an existing trend.

Continuous patterns include ascending triangles, descending triangles, wedges, flags, symmetrical triangles, and pennants.

While the pennant behaves similarly to the flag pattern, the actual appearance of the trend is more like a triangle pattern.

Breakouts occur in both directions, but almost all pennants are continuation patterns

This means that pennants in an uptrend are expected to break out to the upside, while pennants in a downtrend are expected to break out to the downside.

The performance of a pennant is largely determined by the initial price change defined by the pennant pole.

Pennant and symmetrical triangle

At first glance, a bullish pennant may look very much like a symmetrical triangle, but upon closer inspection, it typically has a smaller size and duration, with volume tending to contract during the pause and then increase on the breakout.

Pennants are also not considered to fluctuate like symmetrical triangles.

A pennant is often interpreted as a brief pause that occurs in a strongly trending market, and it is thought that the move after completion should repeat the move before the pennant was completed.

The Symmetrical Triangle is a chart pattern characterized by two converging trend lines connecting a series of consecutive peaks and troughs.

The difference between the two is the duration and appearance of the “flagpole”

A bullish pennant pattern, performed in an uptrend, will cause price to break higher, while a bearish pennant pattern will cause price to break lower.

How to trade pennants

Many traders look to open new long or short positions following a breakout of the pennant pattern.

For example, when a bullish pennant forms, you can place a buy limit order above the upper trendline of the pennant.

Another approach is to first wait for price to breakout and then look for above-average volume to confirm the breakout. Only then can you go long.

If you want to learn more foreign exchange trading knowledge, please click: Trading Education.

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