Even though the new week has begun we still haven’t looked through every trading pattern there is, so we need to pay a little bit more time towards this topic. But it is so interesting to learn all of that, that I do not think you are going to be extremely disappointed.
So, it is a time to look at bearish and bullish pennants.
In short this is a tool that serves the exact same purpose as the rectangular pattern that just took on another form.
But it is difficult to explain on words. Here is the example of bullish pennant.
and investors needed a little bit of time to catch a breath and to resume the uptrend further.
We can see that the price here began to consolidate and a triangle was formed as a result of this consolidation and crossing of resistance and support line.
What are the tricks here? Well, it is regular for the price to go on with the previous trend after the pennant was formed. And it is extremely rare that the price is going to breach a lower point and reverse itself after the formation of the pennant.
It is the same with the bearish pennant.
The downtrend slowed down for a little it here only to resume after traders made up their minds and caught a little bit of breath.
Downtrend in this case has to be almost vertical. That means that the selloff was so strong that the market couldn’t withstand the persisting trend and had to make a pause before any further actions were taken.
Note that the heights of the chart before the consolidation will be just the same as after the trend is going to resume. So you do not have to psychic in order to see how much of a fall the currencies are going to take.