Bullish and Bearish Pennant Flag Chart Patterns: How to Trade Them?

Feature

Bullish Pennant

Bearish Pennant

Prior move

Sharp move up

Sharp move down

Trend expectation

Continuation higher

Continuation lower

Breakout direction

Above upper trendline

Below lower trendline

Typical entry

Buy after breakout

Sell after breakdown

Typical stop loss

Below lower side of pennant

Above upper side of pennant

Typical target

Flagpole length added to breakout

Flagpole length subtracted from breakout

Feature

Pennant

Flag

Pattern type

Continuation pattern

Continuation pattern

Consolidation shape

Small triangle

Small channel

Trendlines

Converging

Parallel

Price action inside pattern

Tightens over time

Moves in a steady range

Typical slope

Neutral to slightly tilted

Usually slopes against the prior trend

Prior move

Sharp flagpole move

Sharp flagpole move

Breakout expectation

In the direction of the prior trend

In the direction of the prior trend

Main identification clue

Higher lows and lower highs compress price

Upper and lower boundaries stay parallel

Symmetrical Triangle Pattern

The symmetrical triangle is a continuation pattern that can break out in either direction.

1. A downward-sloping upper trendline connects at least two lower highs.

2. An upward-sloping lower trendline connects at least two higher lows.

3. The breakout usually follows the direction of the existing trend.

Rectangle Pattern

The rectangle is a continuation pattern in which price moves sideways between two horizontal levels.

1. A horizontal resistance line connects at least two similar highs.

2. A horizontal support line connects at least two similar lows.

3. The breakout usually follows the direction of the existing trend.

Pennant Pattern

The pennant is a continuation pattern that can be bullish or bearish.

1. A sharp price move forms the flagpole.

2. Price then forms a small triangle with converging trendlines, called the pennant.

3. The breakout usually follows the direction of the flagpole.

Butterfly Pattern

The butterfly is a harmonic pattern that can be bullish or bearish.

1. Price forms five points, labelled X, A, B, C and D.

2. Point B retraces 78.6% of the XA swing.

3. Point D extends beyond point X, at the 127% to 161.8% Fibonacci extension of the XA swing.

4. Traders look to buy at point D in a bullish butterfly and sell at point D in a bearish butterfly.

Double Top Pattern

The double top is a bearish reversal pattern that forms after an uptrend.

1. Price makes two highs at a similar level.

2. The swing low between the two highs forms the neckline.

3. The breakout is confirmed when a candle closes below the neckline.

Triple Top Pattern

The triple top is a bearish reversal pattern that forms after an uptrend.

1. Price makes three highs at a similar level.

2. The swing lows between the three highs form the neckline.

3. The breakout is confirmed when a candle closes below the neckline.

Head and Shoulders Pattern

The head and shoulders is a bearish reversal pattern that forms after an uptrend.

1. Price makes three highs, and the middle high (the head) is the highest.

2. The two outer highs (the shoulders) sit at a similar level.

3. The breakout is confirmed when a candle closes below the neckline, the line drawn across the lows between the three highs.

Rising Wedge Pattern

The rising wedge is a bearish pattern that can form as a reversal after an uptrend or as a continuation in a downtrend.

1. Two upward-sloping trendlines move closer together as price makes higher highs and higher lows.

2. The lower trendline (support) is steeper than the upper trendline (resistance).

3. The breakout is confirmed when a candle closes below the lower trendline.

Descending Triangle Pattern

The descending triangle is a bearish pattern that usually forms as a continuation in a downtrend.

1. A flat lower trendline (support) connects at least two similar lows.

2. A downward-sloping upper trendline connects at least two lower highs.

3. The breakout is confirmed when a candle closes below the support line.

Bear Flag Pattern

The bear flag is a bearish continuation pattern that forms in a strong downtrend.

1. A sharp drop in price forms the flagpole.

2. Price then moves in a small channel that slopes up or sideways, called the flag.

3. The breakout is confirmed when a candle closes below the lower line of the flag.

Double Bottom Pattern

The double bottom is a bullish reversal pattern that forms after a downtrend.

1. Price makes two lows at a similar level.

2. The swing high between the two lows forms the neckline.

3. The breakout is confirmed when a candle closes above the neckline.

Triple Bottom Pattern

The triple bottom is a bullish reversal pattern that forms after a downtrend.

1. Price makes three lows at a similar level.

2. The swing highs between the three lows form the neckline.

3. The breakout is confirmed when a candle closes above the neckline.

Inverse Head and Shoulders Pattern

The inverse head and shoulders is a bullish reversal pattern that forms after a downtrend.

1. Price makes three lows, and the middle low (the head) is the lowest.

2. The two outer lows (the shoulders) sit at a similar level.

3. The breakout is confirmed when a candle closes above the neckline, the line drawn across the highs between the three lows.

Falling Wedge Pattern

The falling wedge is a bullish pattern that can form as a reversal after a downtrend or as a continuation in an uptrend.

1. Two downward-sloping trendlines move closer together as price makes lower highs and lower lows.

2. The upper trendline (resistance) is steeper than the lower trendline (support).

3. The breakout is confirmed when a candle closes above the upper trendline.

Ascending Triangle Pattern

The ascending triangle is a bullish pattern that usually forms as a continuation in an uptrend.

1. A flat upper trendline (resistance) connects at least two similar highs.

2. An upward-sloping lower trendline connects at least two higher lows.

3. The breakout is confirmed when a candle closes above the resistance line.

Cup and Handle Pattern

The cup and handle is a bullish continuation pattern that forms in an uptrend.

1. Price forms a rounded bottom, called the cup, between two highs at a similar level.

2. A small pullback, called the handle, forms near the high on the right side of the cup.

3. The breakout is confirmed when a candle closes above the resistance line at the top of the cup.

Bull Flag Pattern

The bull flag is a bullish continuation pattern that forms in a strong uptrend.

1. A sharp rise in price forms the flagpole.

2. Price then moves in a small channel that slopes down or sideways, called the flag.

3. The breakout is confirmed when a candle closes above the upper line of the flag.

Reversal Candlestick Patterns

This guide explains how candlestick patterns warn that an uptrend or a downtrend may reverse.

1. Bullish reversal patterns form after a downtrend.

2. Bearish reversal patterns form after an uptrend.

3. Traders wait for a confirmation candle before entering a position.

Chart Patterns in Trading

This guide explains how chart patterns form from price swings over many candles.

1. Reversal chart patterns warn that the existing trend may end.

2. Continuation chart patterns show a pause before the existing trend continues.

3. Traders enter a position when a candle closes beyond the trendline that marks the edge of the chart pattern.