@eatbreakfast has more experience than I with pencils, but I would say that it would be unlikely for a female pencil to transition in your tank. The transitional males can be prone to reverting even if at all dominated by other wrasses. They really do best as the only wrasses in the tank, or alongside only a few other very peaceful species.
Thanks Hunter. I read in your wrasse article that the males are prone to reverting back, which is one reason I don't want to spend double on a male, only for him to turn into a female anyway.
While I have no real aggressive fish, there are quite a few very active busy bodies and a definite hierarchy, with some more dominant than others. Since I don't have much space left, I might rather pass for something more suitable.