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Pennant and Wedge Patterns

Like triangles and rectangles, pennants and wedges are continuation patterns. They look like triangles, but much smaller. Pennants are sideways and horizontal, but wedges are either ascending or descending. This is the main difference they have. Like the triangles, there are bullish and bearish pennants and wedges.

Bullish and Bearish Pennants:

Pennants

And this is how wedges look like:

Wedges

Pennants and wedges are completely the same as the triangles in trading. Something you have to be careful about is that you should not rush and take a position as soon as you think that you have found a pennant or wedge. You have to wait for the market to develop a complete pennant or wedge. Then you should wait for the pennant or wedge resistance (in case of a bullish market) or support (in case of a bearish market) breakout to go long or short. Sometimes, pennants and wedges are tricky and you have to be careful about this.

This is an examples of a bullish pennant formed on EUR/USD daily chart. We could go long when the first candlestick closed above the resistance. We could place our stop loss below the candlestick that broke above the resistance. Our target could be at least X3 of our stop loss.

Bullish Pennant Formed on EUR/USD Daily Chart:

Bullish Pennant

This is a wedge that is formed almost at the bottom of a bearish market, and it seems it has worked as a reversal pattern in this case. That is why I told you that you should not trade the patterns based on the rules, and you should always wait for support/resistance breakouts.

A Wedge Formed on EUR/USD Daily Chart:

Wedge

This is the example of a bearish pennant. As the candlestick which has broken below the support line is relatively long, I would place my stop loss almost at the middle of this candlestick, not above it.

Bearish Pennant on EUR/USD Daily Chart:

Bearish Pennant

And finally, a bullish wedge on GBP/USD daily chart:.

Bullish Wedge on GBP/USD Daily Chart:

Bullish Wedge

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“Whether you think you can, or you think you cannot, you are right.” – Henry Ford



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12 thoughts on “Pennant and Wedge Patterns
  1. Barbara D. says:

    Chris would you trade this without considering where the setup is formed with regards the BB?

  2. Mark Lockyer says:

    Chris, what are your views on the pennant (with consistent lows around 1.91 since late Jan 2015) forming on the GBPAUD daily? Thanks

  3. Mark Lockyer says:

    Thanks Chris

  4. Pivotal Springboards says:

    Good analysis tools.

  5. Charles Booth says:

    Nice article thanks for sharing.

  6. Arin Davidian says:

    Nice patterns to use.Thanks
    Chris do we always use the min and max of the candlesticks to draw resistance or support line? Or sometimes we use the closing and opening of the cnesticks too?Thanks.

  7. basharat Javed says:

    Really great work , i have no words to appreciate you dear chris.