AN INTRODUCTION TO THE BIULLISH PENNANT CHART PATTERN
When you will have an interaction with the pennant formation you will get to know about trading the pennant it is a very similar process to trading flag. In this particular article we look at what a bull pennant is, its structure, strengths and weaknesses. And will get to know about how to draw a table pennant and make profit.
WHAT IS A BULL PENNANT ?
A bullish pennant is very similar to a bullish flag. But the difference between the flag and the pennant is that unlike the flag, where the price action consolidate within the two parallel lines, the pennant uses two converging lines for consolidation until the break out occurs.
WHAT DOES IT INDICATES ?
A bull pennant is a bullish continuation pattern that signals the extension of the uptrend after the period of consolidation is over. This pattern consists of two phases --- a strong uptrend and consolidation.
However,
The later phase take the form of a wedge or Triangle in case of the pennant, unlike the flag where we have a channel.
The consolidation phase must stem from an uptrend, it's just a normal Triangle. Hence, the move higher is classified as flagpole, with a pendant coming on top of it.
IDENTIFICATION OF THE PATTERN
As a continuation pattern, vicky in Sporting the bullpen and lies in the identify a clean- uptrend first. The uptrend is defined as a series of the higher higher and higher lows. If consolidation ben takes the form of pennant, we must be ready to dip into the market as soon as the Breakout occurs.
Just a few hours after the consolidation has started, it actually ended with a powerful bullish bar that burst through the upper line.
HOW TO TRADE THE PATTERN ?
As a smart trader we noted that we should wait for a Breakout to take place before entering the long trade. This is a device to protect yourself from a potential reversal, as consolidation may result in the change of a trend direction rather than continuation.
Therefore,
the pennant chart pattern is in "draft " mode until the break out takes place.
..... WHEN TO ENTER THE TRADE ? ....
Here we have two options to make entry in a trade.
1) Firstly is that, you can open a treat as soon as the breakout bar closes above the upper line of the pennant or we can say that when the close is confirmed.
2) You can eventually of to wait for a throwback, when the price action returns to the crying scene to retest the broken pennant.
.... STOP LOSS ....
Generally , the stop loss is located below the upper line - the resistance - however, the triangle in this case is very narrow as two trend lines have almost intersected when the Breakout took place.
.... PRICE TARGET .....
Take profit is Defined by same as the flag pole, from a point of the breakout . The endpoint of the trend line signals a level where the bull pennant pattern is completed.
.... THE BOTTOM LINE ...
This is all what we have already learnt about the particular chart pattern. Being good trader we should wait till the formation is completing and then it is very important to place a stop loss order as well as target to make the best profits.
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