Similar to the Flag chart formation, the pennant continuation pattern is guided by almost the same principles. The only difference between the two is that the support and resistance lines converge, which makes this continuation pattern to appear as a pennant.
Pennants can be either bullish or bearish. A chart pattern of a bullish pennant is observed when the original trend is bullish as well. On the other hand, a bearish pennant is observed under the conditions of a going down original trend. In both cases it is vital that the movement of the price preceding the pennant formation be a solid, steep move.
The pennant direction is not that important as is the case of the flag pattern, though generally the pennant is flat.
The pennant continuation pattern is considered complete when the breakout of the price is in the same direction of the steep price movement prior the formation. Additionally, there has to be heavy market volume during the breakout in order to confirm the chart pattern.
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