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Bulkowski's Pennants

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As of 02/15/2019
  Industrials: 25,883 +443.86 +1.7%
  Transports: 10,568 +30.06 +0.3%
  Utilities: 739 +3.09 +0.4%
  Nasdaq: 7,472 +45.46 +0.6%
  S&P 500: 2,776 +29.87 +1.1%
YTD
+11.0%
+15.2%
+3.6%
+12.6%
+10.7%
Tom's Targets    Overview: 02/14/2019
26,000 or 24,600 by 03/01/2019
10,900 or 9,900 by 03/01/2019
755 or 725 by 03/01/2019
7,700 or 7,050 by 03/01/2019
2,825 or 2,650 by 03/01/2019

Written by and copyright © 2005-2019 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Some pattern names are the registered trademarks of their respective owners.

Statistics updated on 1/7/2019.

For more information on this pattern, read Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book., pictured on the right, pages 522 to 535.

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Pennants are the workhorses of the day trader. They perform an invaluable service by marking the midway point in a move. However, they only work in this manner about 30% of the time (see the measure rule).

Pennant chart pattern
Pennant Chart Pattern

 

Important Bull Market Results* for Pennants

Overall performance rank for up/down breakouts (1 is best): Not applicable
Break even failure rate for up/down breakouts: 54%; 56%
Average rise/decline: 7%; 6%
Throwback/pullback rate: 57%; 63%
Percentage meeting price target for up/down breakouts: 34%; 30%

The above numbers are based on hundreds (700 to 900) of perfect trades. See the glossary for definitions.

* The performance results for pennants are based on the short-term price swing, not the change from the breakout to the ultimate high or low as in most other chart patterns.

Pennant Identification Guidelines

CharacteristicDiscussion
Price trendCan be any direction leading to the chart pattern.
ShapeLooks like a short symmetrical triangle.
TrendlinesPrices move between two converging trendlines.
3 weeksPennants are short, 3 weeks long or less. Patterns longer than that are symmetrical triangles, rising or falling wedges.
FlagpoleThe flagpole which leads to the pennant should be unusually steep and last several days.
Volume trendDownward trend 89% of the time.
BreakoutUpward 57% of the time.
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Pennant Trading Tips

Trading TacticExplanation
Measure ruleCompute the height from the start of the price swing (point A in the measure rule figure to the right) to the end of the price swing (B) and then multiply it by the above 'percentage meeting price target.' Add it (upward breakouts) to the bottom of the pennant (C) or subtract it (downward breakouts) from the top of the pennant (C) to get the target (D).
Half staffThe average time from the trend start (below the pennant) to the start of the pennant is 11 days. Price rises (from the close at trend start to pennant high) 21% over that period. The time after the pennant (pennant end to trend high) is 10 days to rise (pennant low to trend high) 15%. Thus, the trend before and after the pennant takes about the same time but price does not rise as far after the pennant. In face, the trend after the pennant is equal to or longer than then inbound trend just 31% of the time. The half staff figure to the right shows an example of how pennants are supposed to work, with A equal to B.
Pennant tiltPerformance suffers when the pennant slopes in the direction of the prevailing price trend. The Pennant Tilt figure to the right shows an example of price tilting upward in a rising price trend.
Flat baseIf the pennant appears above (upward breakouts) or below (downward breakouts) a flat base then expect the move to be a large one.
Tight pennantsA tight pennant performs better than a loose one. A loose pennant is one in which price meanders, pokes outside the trendline boundary, contains white space, or looks jagged. The Tight v. Loose figure to the right shows an example.
Yearly lowPennants perform best within a third of the yearly low for downward breakouts only.
Throwbacks and pullbacksThrowbacks and pullbacks hurt post breakout performance.
Pennant chart pattern measure rule
The Measure Rule
Pennant half staff move
Half Staff
Pennant tilt
Pennant Tilt
Tight versus loose pennant
Tight v. Loose
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Pennant Example

Pennant chart pattern example

The above figure shows an example of a pennant chart pattern. The flagpole begins at point A and completes at B. Following that, the pennant appears from B to C, bounded by two converging trendlines then the decline resumes and bottoms at D.

-- Thomas Bulkowski

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Other Pennant Examples

See Also

Written by and copyright © 2005-2019 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Some pattern names are the registered trademarks of their respective owners. Hit any user to continue.