Pennant

A pennant is a continuation pattern which appears in the middle of a strong trend, as a period of mild price retracement in which a line connecting the highs of the retracement candles and another line connecting the lows of the retracement candle converge. There is a similarity between pennants and flags, with the main difference being that the trend lines connecting the highs and lows of the flag pattern are parallel to each other while those of the pennant converge.

There are two types of pennant patterns:

1) Bullish pennant pattern where the pennant forms in the middle of a strong uptrend. Here, the pennant shows up as a period of mild downward retracement in the midst of an uptrend, after which prices are expected to keep rising after the pennant has formed.

Bullish pennant
Bullish pennant

2) Bearish pennant pattern where the pennant forms in the middle of a strong downtrend. In this case, the pennant manifests as a period of mild upward retracement in the midst of a downtrend, and price is expected to continue in the downward direction after the pennant has formed.

Bearish pennant
Bearish pennant