Bullish Pennant vs Bearish Pennant Pattern (Comparison): Explaining the Difference
If you’re new to trading stocks or options, you will often hear the terms “Bullish Pennant” and “Bearish Pennant” being tossed around. And that may leave you wondering what the hell anyone is talking about.
Use the quick links to jump straight to learn more about each flag pattern.
- What is a Bullish Pennant?
- How to Trade a Bullish Pennant
- Do Bullish Pennants Fail?
- What is a Bearish Flag?
- How to Trade a Bear Flag
- Do Bearish Pennants Fail?
In this article we discuss the difference between Bullish Pennant vs Bearish Pennant, how to identify them, and how to trade them so you can have more consistent and profitable trades.
If you’re ready to learn more about Bullish Pennants and Bearish Pennant, let’s dive into this!
What is a Pennant, Exactly?
The term “pennant” may sound scary but there’s nothing to worry about in the charting world.
The term pennant is used when the price of a stock creates a pennant like triangle shape after a period of time–this can be during small and big timeframes.
The pennant is a continuation chart pattern from it’s current trend.
There are two types of pennants:
- Bullish Pennant: This is when price action rises above the top of the trend line after strong uptrend.
- Bearish Pennant: This is when price action declines below the bottom trend line after strong downtrend.
How to Spot a Bullish Pennant?
A Bullish Pennant is a bullish continuation signal to the upside. It gets formed after a steep or near vertical rise in price action, and it consists of two trend lines that narrow into a triangle shape.
During the pullback, it creates new lower highs, and lower lows in price action, thus creating a trend lines also known as “The Pennant“. The Pennant can be typically appears in horizontal direction or a slightly downward or upward trend.
The Bullish Pennant is confirmed when the price rises above the upper pennant trend line of the formation.
How to Trade a Bullish Pennant
You can enter a trade when the price breaks the upper trend line of the pennant, or wait for the price to breakout, and re-test the trend line for clear confirmation.
Do Bullish Pennants Fail?
Yes, Bullish Pennants can pull a reverse in trend if it does not break the upper pennant trend line.
How to Spot a Bearish Pennant?
A Bearish Pennant is a bearish continuation signal to the downside. It gets formed after a steep or near vertical decline in price action, and it consists of two trend lines that narrow into a triangle shape.
During the pullback, it creates new lower highs, and lower lows in price action and tapers, thus creating a trend lines also known as “The Pennant“. The Pennant can be typically appears in horizontal direction or a slightly downward or upward trend.
The Bearish Pennant is confirmed when the price declines below the bottom pennant trend line of the formation.
How to Trade a Bearish Pennant
You can enter a trade when the price declines below trend line of the pennant, or wait for the price to breakout, and re-test for a rejection on the trend line for clear confirmation.
Do Bearish Pennants Fail?
Yes, Bearish Pennants can pull reverse in trend if it does not break the bottom pennant trend line.
