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Wednesday, April 2, 2014


Bullish pennant pattern formation can be considered to confirm the trend continuation or trend reversal. When a bullish pennant pattern is to indicate trend reversal, it will have an inverse mast (long tail). Bullish pennant chart formation has one falling top containing resistance levels or lower lows, and one rising bottom containing support levels, higher highs.

In case of pennant formation, we can see that the resistance levels of the currency pair go lower and lower, and the support levels go higher and higher. At the point of pennant pattern completion, the both support and resistance come closer to each other, and the pair reaches to make a break out.
A bullish pennant pattern is similar to bullish flag pattern and symmetrical triangle pattern. Generally, at the beginning of pennant formation the volume tends to decrease,but increase also accepted.But along the pennant formation the volume is expected to decrease. At the break out point of pennant pattern the volume is expected to spike to ensure the reliability of the pennant break out. 

Another important feature of reliable pennant pattern formation is the completion point of the pattern. If the candlestick at the end of the pattern is small enough or a doji, the pennant pattern break out is more reliable.Technical analysts focus on the pennant pattern created within a short time. I prefer a pennant pattern formation with 7-10 candlesticks to be considered as reliable.

The profit target of an order with pennant formation should be the length of the mast. Both trend continuation and trend reversal is indicated by pennant pattern break out. When a bullish pennant break out indicates  trend continuation the mast represents a strong previous bullish trend, similarly when a bullish pennant break out indicates  trend reversal, the mast represents a strong previous bearish trend.

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