A stock market pennant is a figure of technical analysis of chartist type and, within these, of continuation of tendency.
A stock pennant receives this name for its appearance with the flags that are usually put in the celebrations. They are small triangular flags. They appear in the corrections of a trend. That is, the moments of rest of a stock market trend. Well, as we know, when a financial asset goes up it does not do it continuously and without brake.
Graphical representation of the stock market pennant
It looks like this:
This figure could be considered a variant of the stock market flag. They are very similar to the naked eye, although the flag is formed by parallel lines and the flag by lines that are cut. His analysis and interpretation is practically the same. The only difference we could appreciate would be that the flags are given in stronger trends.
Types of stock pennant
We could differentiate between two types of pennants. Bullish pennants, which are those that appear in uptrends. And the bearish pennants, which are those that appear in downtrend. In both cases, they are usually quite small in relation to the preceding trend. Trend that, by the way, in all cases is very strong.
· Bullish Pennant
A bullish pennant is given in very strong bullish trends. That is, in assets that are rising very quickly. For example:
The projection of the bullish pennant is at least the size of the preceding bullish movement.
· Bass Pennant
A bullish pennant is given in very strong downtrend. That is, in assets that are falling rapidly. For example:
The projection of the bearish pennant is, at least, the size of the previous bearish movement.
In both cases, the projections are not always met strictly. Mainly for two reasons. The first has to do with the correct identification of the figure. We must bear in mind that the identification is incorrect and is not a flag. And the second reason has to do with the randomness of the stock market. The theory is not always fulfilled. Otherwise, we would all be rich.
Difference between stock pennant and stock triangle
Although in reality the treatment could be the same, stock market flag and stock market triangle are not the same. While it is true that many analysts do not differentiate between pennant and small triangle this is theoretically wrong. Although they are continuation figures the implications and interpretations are not the same. Next we will see the main differences:
- Duration:The duration of a pennant is always very short. On the other hand, a triangle can have a reduced duration (although not as reduced) but also a much longer duration.
- Implication: The implication of a pennant is another movement equal to or greater than the preceding movement. The implication of a triangle is its height.
- Previoustrend : The preceding trend of a pennant is always very strong. Meanwhile, a triangle may be preceded by a very strong trend or not. That is, in triangles it does not have a condition.
In any case, identification as a figure or another will depend on the experience of the analyst and his more or less subjective judgment. For some analysts this differentiation will be important and for others it will not be important. Everything is said, theoretically that difference exists.
Finally, in my opinion, together with stock market flags and flat guidelines , it is one of the most profitable and easy figures for trading . Of course, this is nothing, if proper monetary management is not carried out and its operation is not part of a tested trading system.