After a big upward or downward move, buyers or sellers usually pause to catch their breath before taking the pair further in the same direction. Because of this, the price usually consolidates and forms a tiny symmetrical triangle, which is called a pennant.

While the price is still consolidating, more buyers or sellers usually decide to jump in on the strong move, forcing the price to bust out of the pennant formation. A bearish pennant is formed during a steep, almost vertical, downtrend.

After that sharp drop in price, some sellers close their positions while other sellers decide to join the trend, making the price consolidate for a bit.

As soon as enough sellers jump in, the price breaks below the bottom of the pennant and continues to move down. Unlike the other chart patterns wherein the size of the next move is approximately the height of the formation, pennants signal much stronger moves.

Usually, the height of the earlier move also known as the mast is used to estimate the size of the breakout move. This means that the sharp climb in price would resume after that brief period of consolidation, when bulls gather enough energy to take the price higher again. In this example, the price made a sharp vertical climb before taking a breather. I can hear the bulls stomping and revving up for another run!

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Just like we predicted, the price made another strong move upwards after the breakout. Like we discussed earlier, the size of the breakout move is around the height of the mast or the size of the earlier move. We introduce people to the world of currency trading, and provide educational content to help them learn how to become profitable traders.

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