Pennant Formation

Pennant Formation

The pennants are closely related to the flags. The same principles apply.
The sole difference is that the consolidation area better resembles a pennant, as
the support and resistance lines converge.

If the original trend is bullish, then
the chart pattern is a bullish pennant. In Figure 5.23., the pennant pole is A to B
The pennant-shaped consolidation is framed by C, B, and D. When the market
breaks through the resistance line B to D, the price objective is E. The
amplitude of the target price is D to E, and it is equal to the pennant pole A to B.
The price target measurement starts from the breakout point.

In the numerical example, the height of the pennant pole is measured as
the difference between 1.5500 and 1.4500, or 1000 pips. Once the resistance line
is broken at 1.5200, the price target is 1.6200, as 1000 pips from 1.5200.


If the original trend is going down, then the formation is a bearish
pennant. The pennant pole is A to B. The pennant-shaped
consolidation is framed by C, B and D. When the market breaks through the
support line B to D, the objective price is E. The amplitude of the target price is D
to E, and it is equal to the pennant pole A to B. The price target measurement
starts from the breakout point.

In the numerical example, the height of the flagpole is measured as the
difference between 139.00 and 119.00, or 2000 pips. Once the support line is
broken at 120.00, the price target is 100.00, as 2000 pips from 120.00.