The Bull Pennant is easy to spot, but is it profitable?

The Bull Pennant Chart Pattern is not one of the more discussed chart patterns because it is not a pattern that is slow-developing, but rather it happens more frequently and it takes a much shorter time to develop.  Regardless, it is never a bad time to explain the Bull Pennant Chart Pattern and test how it has performed over the past two years.

What is the Bull Pennant Chart Pattern?

The Bull Pennant Pattern is supposed to be a bullish continuation pattern, which means that if the market is moving downward, a bull flag would indicate that there is more bearish activity to come.  Naturally, it is an opportunity for traders to short a currency pair, CFD, commodity or any other type of traded instrument.

What does the Bull Pennant look like when it is actually on a chart?

The problem with the Bull Pennant Pattern is a matter of defining what it looks like as there are disagreements.  These disagreements involve the following issues:

1. How many periods does a Bull Pattern include?
2. How high can a Bull Pattern retrace after a downward movement?
3. Do wicks matter in terms of determining the trendlines?
4. How much of a bullish movement prior to the Bear Pattern deserves consideration?

It's a pattern and there are no rules set in stone.  It's rather subjective and there is no truly definitive answer.

A Bull Pennant simply has these characteristics:

• A sudden upward movement to precede the pennant.
• A triangular formation immediately after the upward movement with lower highs and higher lows.
• The price rises above the high trendline formed connecting the highs.

Backtesting the Bull Pennant Pattern with an Indicator

The testing conditions will involve this pattern being used with different timeframes used and different currency pairs.  All positions will be long positions.

Timeframes Used:  1 Hour, 4 Hour

Currency Pairs Used:  EURUSD, USDJPY, AUDUSD

Take Profit: Pennant high + ((Flagpole height) * 60%)

Stop Loss Criteria:  Pennant low

Time Period Tested:  July 1, 2016 through June 30, 2018

Bull Pennant Chart Pattern Backtests

4 Hour Chart – EURUSD

1 Hour Chart – EURUSD

4 Hour Chart – USDJPY

1 Hour Chart - USDJPY

4 Hour Chart - AUDUSD

1 Hour Chart - AUDUSD

Overview of the Bull Pennant Chart Pattern

In isolation, the Bull Pennant Chart Pattern does not provide the quality of trades that one would want to place.  Over the course of two years, the results are simply not strong enough and the number of trades seem far too fleeting on an individual currency basis.  The Bull Pennant would require one filter and the ability to trade multiple currencies on an automated basis.  The Bull Pennant may have greater potential in tandem with an indicator or another form of price action rather than in isolation.

There are better Chart Patterns out there.