As you’ve probably gathered from spending a fair amount of time in the Forex market, there are a great number of aids for performing technical analysis. Each one has proven to be a reliable indicator. And pennants are among those tools. These are patterns that come about after a strong move in the foreign currency market. A wide range of individuals view it as the ideal strategy, perhaps for trading exotic currency pairs.
What usually happens is that after a period of high buying or selling, investors take a break before trading a currency pair in the same direction. This pause causes the price to consolidate; hence a small triangle forms in the charts, known as a pennant. As the rates consolidate, traders buy or sell currencies in order to take advantage of the renewed move. This makes the price break out of the pennant formation. A bear pennant takes place after a sharp drop in the currency brings investors to a pause. Most individuals close their trades while others keep theirs open, helping the prices consolidate. As more sellers join in, the currency rates break through the pennant.
The charts always reflect a new decrease in prices after their break out. A Bullish Pennant as you would assume, indicates that the prices resumed their climb in value after breaking through.
If you plan to invest and profit today from the Spot Forex, it’s always advisable that you conduct detailed analysis of the market.