What are the main differences between a Symmetrical Triangle pattern and a pennant?
Although both the symmetric triangle and the pennant are continuation patterns with a good degree of reliability, there are two key differences between the two in terms of formations.
Key points to remember
- A symmetric triangle is a chart pattern characterized by two converging trend lines connecting a series of sequential peaks and troughs.
- Pennants are continuation patterns where a period of consolidation is followed by a breakout.
- The two differ in the duration and appearance of a “flagpole”
Symmetric triangle
A symmetric triangle chart pattern represents a period of consolidation before price is forced to break or crash.A breakout of the lower trendline marks the start of a new downtrend, while a breakout of the upper trendline indicates the start of a new uptrend.The pattern is also known as the wedge chart pattern.
The price target for a breakout or breakout from a symmetrical triangle is equal to the distance between the high and low of the first part of the pattern applied to the breakout price.
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pennants
A pennant is a continuation pattern in technical analysis formed when there is a large move in a security, known as a flagpole, followed by a period of consolidation with converging trendlines – the pennant – followed by a breakout movement in the same direction as the first. large movement, which represents the second half of the mast.
Pennants, which are similar to flags in structure, have converging trend lines during their consolidation period and last from one to three weeks. The volume at each pennant period is also important. The initial move should be met with strong volume while the pennant should have weakened volume followed by a strong increase in volume during the breakout.
Image by Sabrina Jiang © Investopedia 2021
Difference 1: the flag pole
Both the symmetric triangle and the pennant have conical bodies formed during a period of consolidation. The price consistently hits higher lows and lower highs, creating two converging trendlines that form this conical shape. However, the pennant includes a pole at the start of the pattern, which is not present in the formation of the symmetrical triangle. The mast is a very important feature of the pennant and is created when the price suddenly rises or dips in the direction of the current trend, forming an almost vertical line. This sharp move is accompanied by significant volume and marks the start of an aggressive move within the current trend. Price then stops, forming the body of the pennant, before breaking out in the direction of the trend with renewed vigor.
Difference 2: Duration
A second difference between the symmetric triangle and the pennant is their duration. The pennant is considered a short-term pattern that forms over a period of days or possibly weeks. Ideally, a pennant pattern lasts between one and four weeks. A triangle pattern can take much longer, sometimes forming over months or years. In fact, if a pennant pattern drags on into its 12th or 13th week, it is generally considered to have become a triangle.
The breakout after a pennant pattern should occur at or near the point where the trendlines converge, called the top. When it is a symmetrical triangle, however, it is optimal for price to break above or below the trendlines between half and three-quarters of the way through the pattern. This means that the pattern often never reaches its apex, forming a flat-topped cone rather than a true triangle. A breakout is eventually forced one way or the other when the price approaches the top. However, a break too early or too late may indicate a weaker pattern and a less robust continuation.