A pennant formation can be bearish or bullish. In the pennant formation, the price consolidates while moving in the form of a pennant, as seen in the chart. You need to sketch the pennant in your imagination and then wait for the exit beyond its boundaries, as we see in the chart of SanDisk Corporation ($SNDK) below.
The technical premise is that at the end of consolidation, at approximately 80% of the pennant’s expected range, a sharp shift in movement should be executed. Usually, the exit from the pennant follows the original trend. In other words: if the stock showed an uptrend before its consolidation in the pennant formation, it is reasonable to assume that the price will break out upward in accordance with the original trend, similar to a bull flag, but without the flagpole. By contrast, if the price consolidates into a pennant while trending down, it is reasonable to assume that a breakdown will occur with a downward movement, similar to a bear flag, but without the flagpole.
Pennant Breakout, SanDisk – SNDK
SanDisk rises immediately when the trading session opens , encounters resistance, and consolidates in the pennant form. The pennant breaks out  and SanDisk continues rising. The buy position can be at the exit from the pennant, or in the transition above the “flag” area. As you see, this breakout formation is very similar to that of the bull flag, but instead of consolidating beneath the upper resistance line, the price consolidates in the shape of a pennant. Personally, I prefer to trade the bull flag formation –it is clearer and simpler to identify entry positions. That said, the pennant formation is still a valuable tool for traders looking for the right entrance or exit point of a stock.
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