Forex Continuous Pattern: Pennants
Pennant or flag pattern is another short-term continuous pattern that indicates the midpoint of longer price movements. This is similar to a flag pattern with consolidation periods forming small triangles rather than rectangular or rectangular parallels. Pennant is a consolidation phase formed after a rapid vertical movement and is usually characterized by a decrease in volume. The consolidation period formed by profit taking by traders who enter before the sharp movement or before the formation of the pole. And in this phase traders who have not been in position since the initial movement will see this phase as an opportunity to enter the market. The formation of banners or pennants coincides with the volume decrease until a breakout occurs, which usually occurs within 15-20 periods (maximum 20 bar).
Pennants pattern is almost similar to flags in terms of pole formation or early movement is very fast to form a vertical motion. After that the price will form the same pennant with triangle pattern. As with other triangle patterns, the entry signal is given when the price breaks out of the pennant or triangle shape toward the previous sharp movement (pole). This breakout movement is usually accompanied by an increase in volume. If the volume does not increase then the risk of failure of this pennant pattern will be large.
The price projection for the pennant pattern is a bit complicated. Most or most traders use long sharp moves that precede the banner (pole) as the minimum price target. As with all other chart patterns, you should also consider the overall support and resistance levels on the chart to determine the area of the potentially weak level and these levels should be considered for partial profit.
The similarity of flags and pennants patterns is preceded by rapid vertical price movements and then price consolidation. Then the difference is the consolidation phase of rectangular flags or parallelograms, while the consolidation pennants triangular shape.
The flags and pennants pattern depends on the price breakout action with increasing volume consideration.