In comparison to bull flag, bullish pennant contains a quick, strong upwards movement but is then followed by many days of price reduction on a smaller volume. However, this is then completed by another rally to a new high on a strong amount of volume. By adding the eventual breakout point to the height of the flagpole, you can work out the technical target for the pattern.
Sharp Move - Again, there needs to be some form of evidence of a trend previously if it is to be considered a continuation pattern. Otherwise, it won’t be showing the same key characteristics. When it comes to pennants, a sharp increase on heavy volume needs to be seen. As well as containing gaps, these moves will also normally occur on heavy volume.
Pennant - As a small symmetrical triangle, a pennant will begin quite wide before converging just like a cone as the pattern matures. Because the slope is normally neutral, there isn't always a reaction high or low from which the trend lines can be drawn. Therefore, the price action is often contained within the converging lines.
Pole - When measuring from the high of the pennant down to the support break, this is considered to be the pole. The pole is formed by a sharp break and this should break the trend line or the resistance line; the line extending up from the break then forms the pole.
Break - A break above the resistance should show that the advance that had previously occurred, has now resumed for a bullish pennant.
Duration - Normally, this pattern is fairly short-term and will go up to around twelve weeks. However, many industry experts believe that eight weeks should be the limit in terms of reliability. In the perfect scenario, the pattern will form over the first four weeks. If a pennant reaches over twelve weeks old, it would turn into a symmetrical triangle.
Targets - If you wanted to estimate the decline or advance, the total length of the pole should be applied to the resistance or support break of the pennant.
Volume - During the decline or advance that first forms the flagpole, volume should be rather heavy and this makes the pattern more legitimate when the sharp moves occur. As the volume expands, it becomes more likely that the pattern will continue.