As the consolidation nears its end, gold breaks out above the upper trendline of the pennant pattern. The breakout is accompanied by a surge in trading volume, confirming the bull pennant pattern. Traders and investors interpret this as a signal for the uptrend to continue and may consider buying or adding to their positions. They anticipate gold’s price could reach a target of $2100 per ounce, estimated by measuring the height of the initial uptrend and adding it to the breakout point.
How to Identify and Trade the Bull Pennant Pattern
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. Most traders use pennants in conjunction with other chart patterns or technical indicators that serve as confirmation. In other cases, the consolidation may occur near trendline resistance levels, where a breakout could create a new support level.
H Pattern
- We want the everyday person to get the kind of training in the stock market we would have wanted when we started out.
- To be a good trader, it is important to understand how to be a good loser.
- The bull pennant is a bullish continuation pattern that signals the extension of the uptrend after the period of consolidation is over.
Even if an indicator is forming, be mindful of how other external factors can influence the pattern’s formation. Also, the bullish and bearish pennant generally take a bit longer to play out. Pennant patterns have an overall favorable probability but entering the trade still carries uncertainty.
Can Pennant Formations Signal Both Continuation and Reversal Patterns?
Understanding the anatomy of a bull penant gives us confidence we’re actually seeing a pennant and not a different triangle chart pattern or pennant formation. When trading, it’s important to remember these facets of bearish and bullish pennants. Bullish pennants can fail due to various reasons, including changes in market sentiment, unexpected news, or overall market weakness. Even with a confirmed breakout, external factors can reverse the price direction, leading to failed patterns. Traders must stay vigilant and ready to adjust their strategies as new information emerges.
You’ll see how other members are doing it, share charts, share ideas and gain knowledge. Trading contains substantial risk and is not for every investor. An investor could potentially lose all or more of their initial investment.
The first bar of the pattern is a bullish candlestick with a large real body within a well-defined uptrend. As with all tools and indicators, bull pennants have a unique list of pros and cons. StocksToTrade has the trading indicators, dynamic charts, and stock screening capabilities that traders what does a project manager do like me look for in a platform. It also has a selection of add-on alerts services, so you can stay ahead of the curve.
Psychology of Pennant Formations
There may be a large bullish continuation pattern, but inside of that is a smaller bearish pattern. Join thousands of traders who choose a mobile-first broker for trading the markets. From beginners to experts, all traders need to know a wide range of technical terms. Deepen your knowledge of technical analysis indicators and hone your skills as a trader. Simple, since we don’t know how long a trend lasts, you can use the 50-period moving average to trail your stop loss. Because if you can’t define a trend objectively, then your bull pennant setup will break down eventually.
As a continuation pattern, the key in spotting the bull pennant lies in identifying a clean uptrend first. The uptrend is defined as a series of the higher highs and higher lows. If the consolidation then takes the form of a pennant, we must be ready to dip into the market as soon as the breakout occurs. The buyers are forcing the price movements higher in a very aggressive manner. After the short-term peak is in place, the price action starts correcting mildly lower. You can see that the form of this correction is triangular, meaning that EUR/USD created a few lower highs and higher lows.
The arrows show a breakout from the resistance, proving the possibility of an upward trend. Within the triangle, there is a consolidation phase, due to which there is the pressure of an upward breakout. This breakout point can be the entry point for traders, and the point at which the second lower point meets the support line is the stop loss level. When the bullish pennant pattern is formed, a strong upward movement is likely to occur when the price breaks above the pennant. The bullish pennant is a formation that signals the extension of an upward move in price. Read on to learn more about the bullish pennant pattern and how to csco stock forecast, price and news trade this powerful technical tool.
Day traders, in particular, love the bull pennant pattern because it is one of the most popular patterns for long-bias traders. The first step in trading the bull pennant pattern is identifying an uptrend. We are looking for a single or series of upward price breaks to do so. If price action is disjointed, it’s essential that a price bar or series of price bars are moving in the same direction with an upward trajectory. A bull pennant pattern consists of a larger bullish candlestick, which forms the flag pole. It’s then followed by several smaller consolidation candles that form a pennant.
Well, when traded properly, these temporary pauses present opportunities to enter into momentum moves at an optimal point. The consolidation builds energy for the next leg up and identifying that coming breakout quickly allows you to ride renewed buying pressure. Not only do we use the 50-period moving average to filter trends, but also to take our profits. I’m sure you’ve heard of the symmetrical triangle pattern, which you can check out in this article here. HowToTrade.com helps traders of all levels learn how to trade the financial markets. But, it’s important to remember that no indicator is 100% accurate.
Being able to visually identify these three stages goes a long way when scanning charts for bullish penant trading setups. The best patterns show all components clearly on the price chart. Contrast this to bearish pennants on the short side, which are the opposite pattern but still continuation patterns. By breaking down real chart examples and detailing a complete trading plan, you’ll gain confidence in trading these temporary pullbacks within an uptrend. So read on to upgrade your price action trading with a versatile new weapon by transforming this pattern from abstract chart shape into tradable strategy. I took all the normal indicators I typically add to every chart to help you see clearly.
HowToTrade.com takes no responsibility for loss incurred as a result of the content what investors are watching after spike in treasury yields provided inside our Trading Academy. By signing up as a member you acknowledge that we are not providing financial advice and that you are making the decision on the trades you place in the markets. We have no knowledge of the level of money you are trading with or the level of risk you are taking with each trade. In my trading journey, I’ve encountered numerous failed patterns.