Bull Pennants

How to Trade a Bull Pennant Pattern

8 min read

A bull pennant is one of the most popular bullish patterns. They consist of either a large bullish candlestick or several smaller bullish candlesticks up, forming the flag pole, followed by several smaller bearish candlesticks forming consolidation into a triangle, which forms the pennant. Look for the price to move out of the pennant to confirm a bullish breakout. 

A bull pennant pattern consists of a larger bullish candlestick, which forms the flag pole. It’s then followed by several smaller consolidation candles that form a pennant. Any bull pennant patterns that consolidate near support levels, then when support holds, price action breaks out of the apex of the pennant.

Bull pennants are continuation patterns found on all charts, a short-term continuation pattern.

It has a small consolidation period before resuming its move up or down. Bull pennants are similar to bull flags. Day traders, in particular, love the bull pennant pattern because it is one of the most popular patterns for long-bias traders.

Both bull pennants and bull flags have a flag pole. The flag pole should have high volume, creating the flag pole to give more credence to the pattern’s strength.

The pennant forms a triangle, whereas the flag is more rectangular, telling the same story. Bulls are in control, and smashing through bears a line of resistance.

People get excited when they see bull pennants or flags. It is important to keep emotions in check because the excitement can get to your head. And you don’t want to make a mistake.

We got these Japanese candlestick patterns from a rice trader named Homma. He realized even back then that emotions have a big impact on price. Whether greed or fear, traders will always be trading those emotions.

Bull Pennant Pattern

Basics

Bull pennant trading has converging trend lines during consolidation. The consolidation period is usually where I like to enter. Watch the level 2, time, sales, and stock chart volume bars.

Try to limit emotions when trading; try to trade systematically and robotically. Remember, we, as traders, are trading against algos and HFTs. It is important to think like a robot when it comes to trading.

So, the pennant part is a wedge on top of the flag pole. The wedge moves together to form the pennant, looking after a flagpole has formed. The flagpole is typically bullish candlesticks made of one big one or a couple.

Similarly, the flagpole shows a large volume coming (if there isn’t, the move is more suspect), while the pennant has a weakening volume, hence the formation.

If you focus on volume bars and trends, you will have a better time trading bull pennants. Regarding trading, it’s all about the battle between buyers (bulls) and sellers (bears). This pennant pattern is bullish. The buyers are in control.

Hence, consolidation that occurs in this trend is the tug of war between the two sides. Notice the indecision candles like doji candlesticks, dragonfly doji candlesticks, or even hammer candlesticks inside the consolidation period. 

An area to keep on watch for a possible entry would be to enter inside the pennant part (wedge part) and enter near or at 9EMA on some time frame. The 9 EMA is one of my favorite moving averages, also known as the tradeline.

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Candlestick Formation

Candlesticks group together to form many different patterns. There are patterns within patterns. That is why it is important to be able to spot patterns.

If you rely only on bullish patterns but see bearish candlesticks, you can get thrown off.

Patterns break down all the time. There may be a large bullish continuation pattern, but inside of that is a smaller bearish pattern. Get good at finding patterns within patterns.

It is also important to avoid getting bogged down in the minutia of what a pattern is. Patterns like the bull flag, symmetrical triangle, and bull pennant can all look alike.

They all tell a similar story: a trend continuation is imminent. Instead of focusing so much on exactly what a pattern looks like, focus on the message being sent. Read between the lines.

Bull Pennant Pattern Trading Strategy

  • Watch for a bullish candlestick that forms a flag pole.
  • Look for several consolidation candles that form a pennant and hold support levels.
  • Once the price breaks out of the apex of the pennant, take entry.
  • Watch if the price can break above the high point of the flagpole.
  • Use a candlestick close below midway of the pennant as your stop.

Bull Pennant Pattern Example

BA Bull Pennant

In this chart example, you’ll see that the bull pennant looks similar to a symmetrical triangle, but there is a flag pole base. Traders would enter a long position once the price breaks out of the apex area. A stop loss would be placed below the base of the apex area if the price reverses.

HD Example

Multiple bull pennants on the $HD chart bounced off 9EMA daily and found momentum. You can see that the pennants looked similar to bull flags. When the price broke the apex level, there was a strong bullish uptrend. Be aware that when the price gets overextended past the nine ema, it will eventually want to gravitate back to that level.

SPY Bull Pennants

Technical Analysis

Traders know how important candlesticks are to technical analysis; they cannot have the simple moving average or VWAP without them.

Candlesticks are the first line of defense when trading. Consider candlesticks as an early warning system for what price action may do.

That said, technical analysis and candlestick patterns go hand in hand. Drawing trend lines without candlesticks is hard, and patterns cannot be created without technical indicators. Those trend lines map out the patterns.

Breakout patterns such as the bull pennant happen when a stock breaks resistance. Buyers get excited. Candlesticks and moving averages form those key levels and become important buy and sell signals

Being able to draw correct trend lines is important. If drawn correctly, the entry could be good. All of this works hand in hand.

The more confirmations, the more experience, the better chance at a successful trade. Remember that only some trades will be successful; however, technical analysis can help increase the success of the trade. Win some, lose some.

To be a good trader, it is important to understand how to be a good loser. It sounds messed up, but it is the truth, and not many trading communities will tell the truth. 

When talking about trading, they will only focus on wins, never losses. It is not like that. 

The team at BullishBears can help you beat the odds and become a good trader. It just takes effort. 

Final Thoughts: Bull Pennant Pattern

Bull pennants are continuation patterns during a strong trend. In the charts shown above, we have seen the pennant form, break resistance, and continue up. Those resistance levels are important.

Because a pattern can break down the understanding that the need to confirm the continuation is important, the real bodies and wicks of candlesticks and the trend lines form the resistance.

If the pattern breaks down, going short or taking profit might be appropriate! Do not think that every pattern will do the same thing every time.

If you want to see the hidden hand behind the pattern, look at a platform like FlowTrade, which shows what the instructional money is doing…knowing this helps a lot to have confidence in the trade.

Every point in the market is unique. Every trading day and minute is like a snowflake. No two are alike, but similarities will be found.

The volume coming in also confirms the move. It is important to study these patterns.

Frequently Asked Questions

A bull pennant is similar to a bull flag and means that the trend of a security will move up with strong bullish momentum. The breakout area of the apex typically has strong volume bars to confirm the breakout.

A bullish pennant is a short-term breakout pattern. A rising wedge is a steady bullish pattern that eventually turns bearish when the price fails angular support.

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