2. Bullish and Bearish Pennants.

There are two types of pennants:

  • Bearish pennant
  • Bullish pennant

This lesson will show you how to identify the bearish pennant and look at ways you can use it to profit from the second half of a strong downtrend.

How to identify a bearish pennant.

See the chart below for an example of what a bearish pennant looks like:

  1. Pole of the pattern

As shown above, before the flag-like pennant forms, the price experiences a sharp drop. This is known as the pennant’s ‘pole.’

The pole can represent either the start or the continuation of a downtrend and its size is important when you are calculating where to place the profit target for your sell trade.

How to enter.

The triangular pennant itself is usually very small in relation to the size of the overall downtrend so this pattern can be hard to spot.

Wait for the price to fall below the pennant’s lower trend line. Once this support has broken, place a sell order after the price retests that trend line – the broken support will now become a resistance level.

See the chart below for an example of this:

And place your stop loss above the new resistance area.

How to identify a bullish Pennant?

A bullish pennant is the exact opposite of a bearish penant.

It is a continuation pattern that marks a pause in the movement of a price halfway through a strong uptrend, giving you an opportunity to go long and profit from the rest of the price rise.

Bullish pennants occur just after a sharp rise in price and resemble a triangular flag as the price moves sideways, making gradually lower highs and higher lows. The uptrend then continues with another similar-sized rise in price.

I will show you how to identify the bullish pennant and look at ways you can use it to profit from the second half of a strong uptrend.

See the charts below to see what a bullish pennant looks like:

wait for the price to rise above the pennant’s upper trend line. Once this resistance has broken, place a buy order as soon as the price retests that trend line – the broken resistance will now become a support level.

See the chart below for an example of this:

Place your stop loss below the new support area.

Homework Assignment:

Send in two charts where you have found a Bullish or Bearish Pennant. And draw it on the chart.

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