How to Draw Pennants Pattern Correctly

The pennants pattern same like flag pattern. The pennant represent brief pauses in a dynamic market move. In fact, one of the requirements for the pennant is that they be preceded by a sharp and almost straight line move. It represent situations where a steep advance or decline has gotten ahead of itself, and where the market pauses briefly to “catch its breath” before running off again in the same direction.

Pennants are among the most reliable of continuation patterns and only rarely produce a trend reversal. Figures 6.6b show what these two patterns look like. To begin with, notice the steep price advance preceding the formations on heavy volume. Notice also the dramatic drop off in activity as the consolidation patterns form and then the sudden burst of activity on the upside breakout.

Construction of Pennants 

The pennant is identified by two converging trendlines and is more horizontal. It very closely resembles a small symmetrical triangle. An important requirement is that volume should dry up noticeably while each of the patterns is forming.
Pennant patterns are relatively short term and should be completed within one to three weeks. Pennants  in downtrends tend to take even less time to develop, and often last no longer than one or two weeks. Pennant patterns are completed on the penetration of the upper trendline in an uptrend. The breaking of the lower trendline would signal resumption of downtrends. The breaking of those trendlines should take place on heavier volume. As usual, upside volume is more critically important than downside volume. 

Measuring Implications 

Pennants are said to “fly at half-mast” from a flagpole. The flagpole is the prior sharp advance or decline. The term “half-mast” suggests that these minor continuation patterns tend to appear at about the halfway point of the move. In general, the move after the trend has resumed will duplicate the flagpole or the move just prior to the formation of the pattern.
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