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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.

 

Bullish pennants typically appear in the middle of large rallies or immediately after a stock has broken out of a basing period.

Bullish breakouts should be accompanied by a significant increase in volume. Use appropriate stops if this is not seen.

The price action prior to the pennant formation can be used as a guide in predicting the price movement upon breakout. So, for a bullish pennant in an uptrend to truly possess great potential, it must have been preceded by a significant move (i.e. if the movement into the pattern was quick and full of energy, the rally after the breakout most likely will be quick and full of energy).

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




NWS was steadily trending up when it traded into this 7-week bullish pennant pattern. The volume surge within the pattern is not typical; in fact one would think that type of volume would cause the stock to penetrate one of the trendlines. Also notice the number of touches along resistance. The more touches the better.



Here is an example of a stock that broke out from a very long basing period and then immediately traded into a bullish pennant. This scenario happens often. It takes a lot of energy to breakout of the base, so the stock needs to “rest” before continuing its move up. Notice the volume on both the breakout from the base as well as the breakout from the pennant.



SNIC was a pretty simple play. The stock was in a steady uptrend when it exploded up in late-July. The stock then trended sideways in a small pennant and then busted out again with another volume surge. Textbook pattern and trade.



FRNT is another example of a stock that broke out of large base on strong volume and then immediately traded into a small bullish pennant. After its brief rest, the stock then broke out again on another strong volume surge. This action is typical and somewhat easy to play.


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