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Bullish Patterns
Symmetrical Triangles
Ascending Triangles
Rectangles
Pennants
Flags
Wedges
Head & Shoulder Bottom
Cup & Handle
Trendlines

Neutral Patterns
Symmetrical Triangles
Rectangles

Bearish Patterns
Symmetrical Triangles
Descending Triangles
Rectangles
Pennants
Flags
Wedges
Head & Shoulder Top
Trendlines

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Pennants

Pennants are small continuation patterns that represent brief pauses within an already existing trend. They are characterized by converging trendlines and have a definite bullish or bearish bias depending on the overall trend.

Bearish pennants appear in the middle of large drops or immediately after a stock has broken down from a substantial rally.

Downside breaks do not have the same volume requirement as their bullish counterparts. Like other bearish breaks, there often is a delayed volume surge.

The price action prior to the pennant formation can be used as a guide in predicting the price movement when the stock breaks down. If the move into the pattern was quick and full of energy, one can expect that same trading activity when support is taken out. But if the stock slowly meanders its way into the pattern, do not expect big fireworks on a breakdown.

The expected price movement is approximately equal to the distance of the move into the pattern.




Here's an example of a stock forming a bearish pennant immediately after breaking a longer term support trendline. This happen often as the stock is still generally in an uptrend when the first break occurs and some amateur traders recognize what they think is a buying opportunity. But the pros are unloading and when buying from the public dries up, the bottom falls out.



Here's is another example of a stock trading into a bearish pennant soon after a longer term uptrend was broken. Notice volume on the initial break was simply average, but the next day was a blood bath. This happens often…a delayed volume surge.



MCD traded into a bearish pennant while in a downtrend. The trendlines are easy to draw which is a bonus. Notice how volume ramped up after the break and stockholders didn't throw in the towel until well after the stock broke support.



PXLW is another example of how volume typically ramps up after a stock breaks down.


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