Pennants

A pennant is a short term continuation pattern that forms after a sharp price move. Instead of a sloping rectangle like a flag, the pause takes the shape of a small symmetrical triangle: lower highs and higher lows converging quickly. The sharp move before it is the flagpole. When price breaks out of the pennant in the direction of the pole, the move usually continues. A bullish pennant follows a sharp rise; a bearish pennant follows a sharp fall.

Anatomy#

Pennant vs symmetrical triangle#

See Symmetrical Triangle.

Why pennants work#

After a powerful move, the market pauses as early participants take profits and new ones wait. The tightening range shows that neither side is pushing hard: there is no real reversal pressure, just a breather. As volatility compresses, orders build at both ends. When the original side returns, price breaks out and the trend resumes. See Compression and Expansion.

Trading pennants#

1. Confirm a real flagpole: fast and decisive, with high volume.
2. Watch the pennant form: tight, converging and on lower volume.
3. Entry: a stop order just beyond the pennant boundary in the pole's direction, or a candle close beyond it.
4. Stop: on the opposite side of the pennant.
5. Target: the flagpole's length projected from the breakout, or trail a stop.

What weakens a pennant#

• The pennant lasts too long and the momentum of the pole fades.
• Price breaks out against the pole's direction; treat this as a failure and stand aside or reverse with care. See Failed Breakouts and False Breaks.
• The breakout has no volume or closes back inside.
• The pole was weak or choppy, not a real flagpole.

Pennants on different timeframes#

Pennants appear on intraday and daily charts. On intraday charts they form and resolve within minutes or hours and are popular with momentum day traders after news. On daily charts they offer swing trades. In both cases, the pattern depends on the sharpness of the pole; without it, you are looking at an ordinary small triangle.

Common mistakes#

• Trading triangles without a flagpole as if they were pennants.
• Entering inside the pennant before the breakout.
• Using a stop that is too wide, wasting the pattern's tight risk.

Frequently asked questions#

What is a pennant in trading?#

A small symmetrical triangle that forms after a sharp move and usually signals that the move will continue after a breakout.

Is a pennant bullish or bearish?#

It takes the direction of the flagpole: a bullish pennant follows a sharp rise, a bearish pennant a sharp fall.

What is the difference between a flag and a pennant?#

A flag's consolidation is a small sloping rectangle; a pennant's is a small converging triangle. Both follow a sharp move and usually signal continuation.

Next, learn the flat range pattern: Rectangles.