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How to Trade Bullish & Bearish Pennants in Forex

Pennants are powerful continuation chart patterns that appear after strong directional moves in the market. Whether you’re in a bullish or bearish trend, these formations help you anticipate the next wave of price action after a brief consolidation phase.

In this guide, you’ll learn how to identify bullish and bearish pennants, what they mean, and how to trade them effectively.

🔍 What is a Pennant Pattern?

A pennant is a short-term continuation pattern formed when price consolidates into a small symmetrical triangle after a steep move (either upward or downward). The consolidation reflects a pause, where market participants temporarily step back before continuing the previous trend.

Pennants are similar to flags and rectangles, but the key difference is that their consolidation phase narrows into a triangle shape—resembling a small flag on a mast.

📉 Bearish Pennant Pattern

A bearish pennant forms during a strong downtrend. After a sharp decline (the “mast”), price temporarily consolidates into a tight, triangle-like structure. This reflects hesitation in the market as sellers take partial profits and new participants decide whether to jump in.

🧠 How to Identify It:

Appears after a steep price drop
Forms a small symmetrical triangle sloping slightly upward
Signals that further downside is likely after consolidation

📊 How to Trade It:

Entry: Place a sell stop order just below the pennant’s lower boundary.
Stop-Loss: Set it slightly above the upper pennant trendline to protect against fakeouts.
Take Profit: Use the height of the initial drop (the mast) to estimate the breakout target.

🧨 Tip: Pennants often lead to explosive moves. Don’t underestimate the power of the breakout.

📈 Bullish Pennant Pattern

A bullish pennant forms after a rapid price surge. Like its bearish counterpart, it marks a brief pause before price resumes climbing higher. This consolidation signals buyers taking a breather before pushing the market further up.

🧠 How to Identify It:

Appears after a sharp price rally
Price forms a tight triangle, sloping slightly downward or flat
Indicates that buyers are likely to return

📊 How to Trade It:

Entry: Place a buy stop order just above the pennant’s upper resistance line.
Stop-Loss: Set it slightly below the lower trendline of the pennant.
Take Profit: Measure the mast height and project it above the breakout point.

🐂 Pro Tip: Bullish pennants often accompany strong uptrends—look for confirmation from volume spikes or momentum indicators.

📌 Final Thoughts on Trading Pennants

Pennants are small formations that often precede large price movements, making them essential for traders who want to catch continuations of strong trends.

To recap: