How to Trade A Bullish Pennant Continuation Pattern

There are dozens if not hundreds of technical patterns available to traders and investors. The question becomes where is your entry point and how do you manage the position. 

Swing Trading Bullish Patterns

Common bullish continuation patterns include flags and pennants. A simple definition of these patterns would be a small pullback or consolidation before the prior move resumes. 

Flag & Pennants

A pullback pattern. That resumes the prior move.

The Pennant pattern is very similar to a symmetrical triangle but the rules are slightly different. The specifics are not that important and getting stuck in the minutia of the technical rules will only slow you down.

Your money management rules and emotional control will get you to the promised land.   

More...

Here's a question(s) I received from a client about trading this setup on Western Digital Corp (WDC). 

Dave – Just curious about your thoughts on this bull flag set up for  a swing trade on WDC. See attached charts – Question – assuming that it breaks out to the up side – long where would you enter?
WDC Bull Pennant

WDC Bull Pennant. Click to enlarge image

There were a few extra details to the question...

  • Enter on the break out?
  • One tick / penny above the 1st swing high.
  • Wait and buy one tick / penny above the high?
  • It is an inside bar - put on an OCO order for a break out / fade either way.The inside bar is at the top it the triangle and will probably fall back to the bottom of the triangle before breaking out to the up side.for a downside scalp you would be @ 76.60 down to approx. 74. for 2 $1.50 profit.The upside breakout should yield about 15 points, up to around $95.00

Whoa...  There's a lot to unpack here. 

With such a detailed question I decided to make a video to go over all the questions and provide a thorough analysis. 

Update: Here's Where WDC is Trading Now...

Nearly two weeks later WDC is has pulled back and even faked out some traders with a breakdown that failed. Followed by a strong push back up and through the top of the pennant for a strong breakout. 

Traders that were trapped short on the failed breakdown helped fuel the strong push as they were forced to cover. 

WDC Update

Here's WDC nearly 2 weeks later. Well on it's way!

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About the Author Dave Gagne

Founder of MarketInsidersClub.com. President and CEO Dynamic Wealth Financial Inc. Author of Trading Master Plan Subscribe to the MarketInsidersClub Youtube Page here

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