14. Bullish Pennant Pattern

The bullish pennant pattern is a continuation pattern that appears in an uptrend, signalling a pause in the rally followed by a resumption upwards. The bullish pennant is formed of a tall 'flagpole' move up, followed by a contracting triangle consolidation of lower highs and higher lows.

This consolidative phase accumulates sellers till a point, wherein the buyers manage to continue the original trend after a proper breakout. In the above mentioned example, observe how a clean breakout occurred with a huge gap up. The target range is calculated by measuring the range of the flagpole. The horizontal zone that acted as a resistance is a potential new support structure. Observe how price managed to retest this horizontal resistance and turned support to invite buyers into another leg of trend continuation.The psychology behind this pattern is that after a sharp advance up, traders take profits, which causes a normal pullback and consolidation. The decreasing volume and volatility reflect a cooling-off period where supply and demand temporarily reach equilibrium. The contracting triangle shape suggests both buyers and sellers becoming indecisive during this pause.A comprehensive study titled "The Profitability of Technical Analysis in the Taiwan Stock Market" by Yung-Shun Tsai and published in the Journal of Economics and Management (2012), found that bullish pennant patterns had a 67.8% success rate in predicting trend continuations across various financial markets.