Pennant
The Pennant is a continuation pattern featuring a strong move (pole) followed by a small symmetrical triangle with converging trendlines. Traders watch for breakouts in the direction of the prior trend, using measured moves based on the pole height for targets.
⚠️ Risk Note: Chart patterns are probabilistic. False breakouts happen. Always define your entry trigger, invalidation, and position size before placing a trade.
What is the Pennant?
The Pennant is a continuation pattern that forms after a strong directional move. It consists of a steep price advance or decline (the pole) followed by a small symmetrical triangle with converging trendlines (the pennant).
Unlike flags which have parallel trendlines, pennants have converging lines that meet at an apex. The pattern represents a brief period of indecision before the prior trend resumes. Pennants can be bullish (after an uptrend) or bearish (after a downtrend).
💡 Key Idea
The converging trendlines show decreasing volatility as the market pauses. This compression often precedes a strong breakout move as energy builds up during the consolidation.
How to Identify the Pattern
- Strong prior move – A steep, significant move in one direction forms the pole.
- Converging trendlines – Price consolidates within trendlines that converge toward an apex (symmetrical triangle shape).
- Small relative size – The pennant should be relatively small compared to the pole.
- Volume pattern – Volume typically decreases during the pennant and increases on breakout.
- Short duration – Pennants typically last 1-3 weeks; longer consolidations may become different patterns.
How Traders Use the Pattern
1) Breakout Entry
Enter in the direction of the prior trend when price breaks out of the pennant with confirmation. For bullish pennants, go long on upward breakouts. For bearish pennants, go short on downward breakouts.
2) Invalidation
Invalidation occurs if price breaks in the opposite direction of the prior trend. For bullish pennants, a break below the pennant's lower line invalidates. Watch for false breakouts near the apex.
3) Measured Move Target
The classic target is the height of the pole projected from the breakout point. This can provide significant reward potential relative to the small consolidation range.
⚠️ Common Mistakes
- No clear pole – The pattern requires a strong prior move. Weak drifts don't create valid pennants.
- Pennant too large – The consolidation should be small relative to the pole; large triangles are different patterns.
- Trading before breakout – Wait for confirmation; anticipating direction within the pennant is risky.
- Ignoring context – Consider where the pattern forms within the larger trend structure.
✅ Quick Checkpoint
1) How does a Pennant differ from a Flag?
Both follow a strong move. Flags have parallel trendlines forming a rectangular channel. Pennants have converging trendlines forming a small symmetrical triangle. Both are continuation patterns.
2) In which direction does a Pennant typically break?
Pennants typically break in the direction of the prior trend. Bullish pennants (after uptrends) break upward. Bearish pennants (after downtrends) break downward.
❓ Frequently Asked Questions
What is the Pennant pattern?
The Pennant is a continuation pattern featuring a strong move (pole) followed by a small symmetrical triangle with converging trendlines. It signals a brief pause before the trend resumes.
How does a Pennant differ from a Flag?
Both follow a strong move. Flags have parallel trendlines forming a rectangular channel. Pennants have converging trendlines forming a small symmetrical triangle.
Can Pennants be both bullish and bearish?
Yes. Bullish pennants form after uptrends and break upward. Bearish pennants form after downtrends and break downward. The prior trend determines the bias.
📋 Summary
The Pennant is a continuation pattern with a strong pole followed by a small symmetrical triangle (converging trendlines). Traders enter on breakouts in the prior trend direction, targeting measured moves based on the pole height. The pattern can be bullish or bearish depending on the preceding trend.