Bull Pennant Pattern: How to Trade With a Bullish Pennant

Use trend lines to outline the pennant and wait for a breakout to confirm the pattern. There you have it – a complete guide to trading the bull pennant pattern. Spotting bearish and bullish pennants can be tricky at first because the consolidation is often small when compared to the preceding price move. To practise identifying and trading patterns without risking any capital, open an IG demo account today. In a bullish pennant, strong positive sentiment causes a market to spike higher (forming the pole).

  1. Triangles and bottoms in charts can also give reason for caution or optimism.
  2. Unlike the flag where the price action consolidates within the two parallel lines, the pennant uses two converging lines for consolidation until the breakout occurs.
  3. The bull pennant pattern is not a trend reversal pattern but a trend continuation pattern.

Then, when the market begins to break out of the pattern, volume spikes. It’s important not to confuse bullish pennants with other patterns such as triangles, falling wedges and bullish flags. HowToTrade.com takes no responsibility for loss incurred as a result of the content 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. Check our video by our trading analysts on how to identify and trade the bullish pennant pattern.

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InvestingNote is the largest & most active community of investors & traders in Singapore & Malaysia. If the price makes this kind of move, it’s clear that the buyers who got “squeezed” finally broke out. It’s a sign of impending volatility as both buyers and sellers are itching to get out of the pullback. Open an IG demo account to put it to the test with $10,000 in virtual funds. Get virtual funds, test your strategy and prove your skills in real market conditions. Trade on one of the most established and easy-to-use trading platforms.

What is a bullish pennant?

Here’s an introduction to how pennants work, and how to trade them. Traders may choose to trade pennant formations because pennants align with the trader’s psychology. In either case, understanding the psychological factors behind pennant patterns can provide valuable insights for traders seeking to make informed decisions.

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The uptrend is often characterized by formation of higher highs and higher lows as the stock breaks market structure to the upside. Unlike trading other chart patterns, the original range of a pennant is rarely used to plan where to take profit. Instead, the breakout often matches the size of the bear or bull move that preceded the consolidation.

Price consistently reaches higher lows and lower highs, creating two converging trendlines that form this conical shape. However, the pennant includes a flagpole at the beginning of the pattern, which is not present in the formation of the symmetrical triangle. This sharp move is accompanied by heavy volume and marks the beginning of an aggressive move within the current trend. Price then pauses, forming the body of the pennant, before breaking out in the direction of the trend with renewed vigor. Pennant formations are short-term continuation patterns identified on price charts. They’re characterized by a small symmetrical triangle created by converging trendlines.

IG International Limited is licensed to conduct investment business and digital asset business by the Bermuda Monetary Authority. Having a sense of the expected success rate helps assess trades. Yes, both are considered reliable but require confirmation through other indicators https://bigbostrade.com/ and market analysis. This eventually leads to a sharp sell-off, as buyers are forced to liquidate their positions. So, you need to know how to protect your profits and cut your losses quickly when necessary. In most cases, you can place a stoploss order below recent lows.

However, the price then quickly reverses direction and plummets, leaving the traders holding the bag with losing positions. Bull traps often occur at the end of a downtrend, when prices make a sudden leap. This leads many traders to believe that the price has bottomed out. Firstly, you want to make sure when a breakout occurs, the volume also surges significantly. As a trader, you should fully understand the risks involved whenever you enter the market.

Read on to learn more about the bullish pennant pattern and how to trade this powerful technical tool. Breakout patterns such as the bull pennant sectors that benefit from rising interest rates happen when a stock breaks resistance. Candlesticks and moving averages form those key levels and become important buy and sell signals.

Notice the indecision candles like doji candlesticks, dragonfly doji candlesticks, or even hammer candlesticks inside the consolidation period. Measure the initial rise in price (the pennant’s pole) before the market started to consolidate. In this example the break was rather significant and added to the likelihood of a continued move to the upside. The example below demonstrates how to trade a Bullish Pennant appearing in GBP/NZD.

In this chart example, you’ll see that the bull pennant looks similar to a symmetrical triangle, but there is a flag pole base. Traders would enter a long position once the price breaks out of the apex area. A stop loss would be placed below the base of the apex area if the price reverses.

It’s a tool I’ve used countless times in my trading and teaching career to identify high-probability trades. The Bull Pennant is a chart pattern that traders use to identify potential upward movements in a stock’s price. This pattern is a reliable indicator of a continuation in an existing uptrend and is often used to spot breakout opportunities. Understanding the Bull Pennant can give traders an edge in predicting future price movements.

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