Trade Bearish and Bullish Pennants

Bearish Pennants

Pennants are a continuation chart patterns formed  after strong moves,  similar to rectangles.

Buyers or sellers frequently pause to catch their breath before taking the pair further in the same route, after a big upward or downward moves.For the reason that the amount usually combines and forms a tiny symmetrical triangle, which is called a pennant.

While the amount is still merging, more buyers or sellers typically decide to jump in on the strong move, obliging the amount to bust out of the pennant formation.

A bearish pennant is shaped during a steep, almost vertical, downtrend.

After that sharp drop in cost, some sellers close their positions, although other sellers choose to join the trend, making the price merge for a bit.

The moment sufficient sellers, join in, the price breaks below the bottom of the pennant and continues to drop.

The drop continued after the price made a breakout to the bottom. To trade with this chart pattern, put a short order at the bottom of the pennant with a stop loss above the pennant. Doing that, you will be out of the trade right away just in case the breakdown was a fake out.

Different from the other chart patterns in which the size of the next move is almost the height of the formation, pennants signal much stronger moves. Typically, the height of the earlier move, also identified as the mast, is used to evaluate the size of the breakout move.

Bullish Pennant

Bullish pennants, just like its name recommends,  it signals that bulls are about to go a-chargin’ once more. This means that the sharp increase in price would continue after that brief period of consolidation, when bulls collect enough energy to take the price higher again.

When price creates a sharp vertical increase before taking a breather. You will feel the bulls tramping and revving up for another run! The price can make another strong move upwards after the breakout. To play this, you can place a long order above the pennant and stop below the bottom of the pennant to avoid fake outs.

Just like stated before, the size of the breakout move is around the height of the mast or the size of the previous move. Pennants may be small in size, you see, but they could signal massive price moves so never underestimate them.

Read more Trade12 reviews and information about stocks, commodities, indices and currencies.   Work with our best forex broker by creating a live account on our official site. With all the positive Trade12 feedback from clients, you will be assured that your funds are in safe hands.