Bullish pennant is a bullish trend continuation chart pattern indicating the continuation of an existing uptrend after a short-term indecision in the market. The formation is very similar to bullish flag pattern but in pennant formation the consolidation after the pole is pennant or triangular shaped rather than flag shaped (being parallel). Bullish pennant pattern is also similar to symmetrical triangle formation, ascending triangle formation and falling wedge formation; the major difference is that this is a shorter term pattern.
Bullish pennant chart pattern forms when there is a consolidation phase in the existing uptrend; the trendlines converge to form a triangular shape and then breakout to continue the existing trend. The volume tends to diminish as the trend develops and the breakout is associated with a great spike in trading volume. The duration of the pattern can range from one to three weeks.
Traders can enter trades once the breakout is confirmed. The target price should be the price equaling the height of the pole from the breakout price. Bullish pennant chart pattern is considered less reliable when there is no significant change in volume during the pattern formation, no increase in volume at breakout and if the pattern took more time to develop (more than four weeks). If the volume tends to increase during the pattern formation rather than decrease, then there is also a possibility of trend reversal.
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