What it is
A Pennant is a short-term continuation pattern that forms during a pause in a strong trending move. It looks like a small symmetrical triangle that forms on a pole - the sharp move that precedes it.
The mechanics: After a strong move (the flagpole), traders take profits and the market consolidates briefly. The consolidation creates a small pennant shape as bulls and bears test each other. Then the trend resumes in the same direction.
Pennants are fast patterns - typically lasting 1-3 weeks. If consolidation extends beyond that, it may be evolving into a different pattern like a symmetrical triangle or range.
The psychology
The Pennant is the flag's sharper cousin - a brief pause during a powerful move. After a strong impulse (the pole), price consolidates in a small symmetrical triangle. Unlike a flag which drifts against the trend, a pennant converges to a point, creating maximum compression.
The converging trendlines represent the negotiation between buyers taking profits and new buyers waiting to enter. Each swing gets smaller as both sides test each other with decreasing conviction. Volume should decline through this consolidation as the market coils.
The breakout from the pennant releases the compressed energy in the direction of the original trend. The sharp pole created momentum, the pennant compressed it, and the breakout unleashes it. This is why the measured move target uses the pole height - the same energy reasserts.
Identification
- 01Sharp prior move (pole) - A strong, near-vertical impulse precedes the pennant
- 02Converging trendlines - Price forms a small symmetrical triangle
- 03Declining volume - Volume should contract during the consolidation
- 04Breakout in the pole's direction - Continuation of the original move
- 01Tight, well-defined pennant - Clean converging lines with 4+ touchpoints
- 02Quick formation - Best pennants complete in 1-3 weeks
- 03Volume surge on breakout - Confirms the continuation
- 04Pennant forms in the middle third of the move - Classic measured move territory
- 01No clear pole - Without a sharp impulse, there's nothing to continue
- 02Pennant drifts too long - More than 3-4 weeks often leads to failure
- 03Volume increases during consolidation - Suggests real counter-trend pressure
- 04Breakout against the pole direction - The pattern has failed as a continuation
Execution framework
Enter on breakout above pennant resistance with volume...
Below opposite side of pennant or below flagpole midpoint...
Bullish Pennant: Below the lower trendline of the pennant. Bearish Pennant: Above the upper trendline. The converging trendlines define the consolidation - a break the wrong way invalidates.
Measured Move: Project the flagpole height (the sharp move before the pennant) from the breakout point. T1: 50-75% of flagpole. T2: Full flagpole projection. Pennants are high-probability continuation patterns.
Often 1:3 or better. The tight consolidation creates small stops relative to the flagpole-based target.
Context matters
The Pennant is one of the most reliable short-term continuation patterns. Its strength comes from the clear impulse move (pole) combined with the tight symmetrical compression before the continuation.
- 01After a sharp, high-volume impulse move
- 02Tight symmetrical consolidation on declining volume
- 03Formation completes within 1-3 weeks
- 04Breakout aligned with the dominant trend
- 05Volume surges on the breakout candle
- 06Pennant retraces less than 38.2% of the pole
- 01After a gradual move rather than a sharp impulse
- 02Wide, sloppy consolidation with no clean trendlines
- 03Extended formation losing momentum
- 04Against the higher timeframe trend
- 05Low volume on breakout
- 06Deep retracement of the pole during consolidation
The tighter the pennant's consolidation, the more explosive the breakout. Wide, sloppy pennants have lower reliability.
Compare the full pattern set
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