How to Trade Bearish and Bullish Pennants

Just like rectangles, pennants are like those chart patterns that pop off after a big ol' move.

After a major up or down move, the squad of buyers or sellers usually gotta chill for a sec before they push the pair in the same direction again.

Cuz of this, the price usually vibes out and forms a lil' symmetrical triangle, aka a pennant.

While the price is still vibing, more buyers or sellers usually decide to hop on the hype train, making the price yeet out of the pennant formation.

Bearish Pennants

A bearish pennant pops up during a steep, almost vertical, downtrend.

After that wild drop in price, some sellers peace out of their positions while others decide to join the trend, causing the price to vibe for a bit.

Once enough sellers join the party, the price breaks below the bottom of the pennant and keeps on sliding down.

See, the drop picked up again after the price made a breakout to the bottom.

To vibe with this chart pattern, we’d put a short order at the bottom of the pennant with a stop loss above the pennant.

That way, we’d bail out right away in case the breakdown was a fakeout.

Unlike other chart patterns where the next move is roughly the height of the formation, pennants mean some dope moves ahead.

Usually, the height of the earlier move (aka the mast) is used to guess the size of the breakout move.

Bullish Pennant

Bullish pennants, just like their name suggests, mean the bulls are ready to charge again.

This means that the sharp price climb would resume after the bulls catch their breath and gather enough energy to push the price higher again.

In this example, the price made a sharp climb before taking a breather. I hear the bulls stomping and getting hyped for another run!

As we guessed, the price made another strong move upwards after the breakout.

To roll with this, we’d put our long order above the pennant and our stop below the bottom of the pennant to dodge fakeouts.

Like we talked about before, the size of the breakout move is around the height of the mast (or the size of the earlier move).

See, pennants might be tiny but they could signal some major price moves, so don't sleep on them!