Candlestick pattern «Pennant» - where the market wind «blows»
- VFX Blog
- For beginners
In technical analysis, the "Pennant" pattern works as a trend continuation model – a special case of a stronger "Wedge" reversal pattern. On persistently volatile assets, this pattern occurs constantly, is implemented correctly in theory, and will be one of the best options for how to make money on binary options.
The appearance of "Pennant" means short-term consolidation. In simple words, this happens when there is an imbalance of volumes in the market with too active speculation and the market cannot decide on the overbought/oversold period for some time. This happens after strong news or when removing large open volumes in the zone of strong price levels.
If the bullish or bearish "Pennant" is generally determined by the trend, then the horizontal "Pennant " is similar to the symmetrical" Triangle", that is, it shows a temporary market balance of buyers/sellers with a slight advantage of the current direction. After a pause, the market should continue the price movement along with the previous trend. To trade, you need to check for a similar pattern and binary option trading signals on higher timeframes.
Technical analysis began to distinguish "Pennant" as a special trading scheme more recently: it has a strong "visual" connection with the classic "Triangle" (support/resistance zones) and "Flag" ("flagpole" and "panel").
Correctly identifying such "relatives" is quite difficult. As a result, the "Pennant" and "Flag" figures should be traded in the same way, and what will happen after the symmetrical "Triangle" depends on the dynamics of volumes, here you can not do without additional analysis or binary options signal service.
Use in trade practice
The basic scheme for pattern formation:
- Price impulse (manipulations with large volumes, news speculation, and other force-majeure of the market).
- The second impulse is a pullback - market makers take profit/loss after the first impulse and open new orders.
- Flat period - the amplitude of the price movement is gradually decreasing.
- The main trend is restored; the binary options opened at the second stage are closed.
There should be at least 3-5 waves in the “Panel” area; the breakdown of the pattern border should occur before the calculated crossing point. If the market has already passed the calculated top, but the flat continues, all binary option signals are canceled and new market analysis is made.
The trend correction according to the "Pennant" scheme is not always shown. What does it mean? This graphical scheme is significantly weaker than the more classic "Flag". You can estimate the probability of working out the model by the accumulation of trading interest at the breakout point, but if the figure has a slope in the direction of the current trend, it is better to skip such options trading signals.
The most working strategy is the classic breakout of boundaries. We are waiting for the breakout, fixing the bar behind the key zone (retest strengthens the signal) and open a deal in the direction of the breakout.
- When the figure "looks" in the direction of the trend, the probability of classic working out decreases. In this case, we expect a reversal, not a continuation of the trend.
- If "Pennant" is visible on the uptrend, a medium-strength reversal signal appears. If a downtrend appears on the uptrend and its border is broken down, a weak trading binary signals for PUT-option.
- Pattern always means only a correction of the current market and short-term one. The appearance must be confirmed by binary trading signals and volume dynamics (better by the exchange, but you can watch ticks): during a flat inside the pattern, the volume should gradually decrease, and begin to grow as it approaches the moment of the breakout.
- A sharp impulse occurs on the breakout, after which the price often quickly rolls back, especially if there are large pending moneymaker volumes on the market. For the model to be considered complete, at least 5-15 bars are needed, and a breakdown must occur at the very end of the “Pennant”.