A pennant is composed of two intersecting trend lines wherein support is inclining upward and resistance is inclining downward. As this happens, it forms a triangle denotative of price fluctuation inside. Such pattern usually happens when a sharp price succeed following an intensive movement.
The primary purpose of pennant is to validate a trend’s direction in case of a break through.
It is viable to sell when a pennant forms during a downtrend and if the price places itself below the support line. However, it is ideal to buy once a pennant appears during an uptrend as the price climbs above the resistance line.When analyzing a pennant, the price is speculated to go with the same direction before the pennant showed up. The target level is calculated as, During downtrend, T=BP-(TS-PS) During uptrend, T=BP+(PS-TS) Where: T is the target price; BP is the breakthrough point; TS is the trend start point; PS is the pattern start point.
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