Bullish Pennant Pattern on Gold, Explained

What it shows

One coloured line traces the pole and the pennant’s four swings, two converging lines with a light fill frame the squeeze, a "Bullish Pennant" label names it, and after the breakout a dotted line runs to a Target label.

How Pravex works it out

1. Only the newest 600 candles are searched. Each swing high is a candle whose high beats all 5 candles before it and is not topped by any of the 5 after it; a swing low is the same test upside down. That second half means a swing is confirmed 5 candles late. If two highs come back to back with no low between them, the lower one is dropped (for two lows, the higher one), so the swings always alternate.
2. The pole runs from the last swing low up to the swing high where the pennant begins. That high is also the pennant’s first point, and three more swings follow: a low, a high and a low. One line runs through the pennant’s two highs and the other through its two lows.
3. It is a pennant only if: the pole is at least twice the pennant’s height at its start; the pole took no more than 1.5 times as many candles as the pennant; the pennant’s lowest point fell back no more than the Pullback limit share of the pole; the end is narrower than 80% of the start, with the upper line flat or falling and the lower line flat or rising; and no close pokes beyond the lines by more than 2% of the end height.
4. The breakout is the first close over the upper line. The target sits one pole length above that line, measured from its price on the breakout candle. Failure level: the pole’s high minus the Pullback limit share of the pole; a low under it before the breakout drops the shape.
5. After the break the pattern carries a status. It reads Awaiting until something happens, Reached once a candle’s high or low gets to the target, Failed if the failure level is crossed before that, and Indefinable if one candle does both.

Settings

Setting	Default	What changing it does
Which patterns to keep	All	Filters the found patterns by status. All shows them all; Awaiting and Reached hides the ones that failed or were indefinable; Only Awaiting leaves just those still heading for their target; Last Awaiting leaves one, the Awaiting pattern that started most recently.
Where targets are drawn	Only Awaiting	Sets which patterns get their dotted target line and Target label: All, Only Awaiting, Awaiting and Reached, or None. Hiding a target does not hide its pattern.
Pullback limit	50	How far, in percent of the pole, the pennant may fall back before the shape stops counting. The same percentage marks the failure level once price has broken out. The pennant has no deviation setting; the converging lines are checked by a fixed rule.
Show unconfirmed patterns	off	Off, the default, waits for a close through the breakout line before drawing anything. On draws shapes still waiting for that close, ending in a dotted leg, with the target they would get. That last point follows the most extreme price since the previous confirmed swing and moves while the candle is live.

How traders read it

A bullish pennant is the market catching its breath after a strong rise: the range tightens, and a close above the upper line says the rise may resume. The target copies the pole up from the break.

In a sketch with invented figures, the pole climbs from 100 to 120 and the pennant’s upper line sits at 117 on the breakout close. The target is 117 plus 20, which is 137.

When it misleads

Pennants are rare on a given chart: four swings have to pack into a short span and converge. When the squeeze is shallow the 80% rule rejects it, when it is deep the pole rule does. Only confirmed swings go into a pattern, yet a drawn one can still change. If a later swing of the same kind goes further, it takes the earlier swing’s place and the pattern moves or vanishes. A breakout on the live candle is also provisional until that candle closes.

Questions and answers

How is a bullish pennant different from a bull flag?

A pennant narrows into converging lines, ending under 80% of its starting height. A flag keeps its lines parallel and drifts flat or down.

What is the target of a bullish pennant?

One pole length above the upper pennant line, measured at the candle that first closes over it.

What makes a bullish pennant Failed?

After the break, a low under the pole’s high minus the Pullback limit share of the pole. Before the break, the same level drops the shape from the chart altogether.

What does Awaiting mean?

The breakout has happened, the target has not been touched yet, and price has not crossed the failure level. Reached, Failed and Indefinable are the other three states.

Related: Bearish Pennant Chart Pattern, Bullish Flag Chart Pattern, Triangle Chart Pattern, All Chart Patterns, every indicator.