Pennant

Introduction

The Pennant is a powerful bullish continuation chart pattern that marks a brief pause in a strong trending market. Characterized by a sharp impulse move (flagpole) followed by a small consolidating symmetrical triangle (pennant), it represents a consolidation of gains before buyers force another breakoutBreakoutA price movement through an established support or resistance level. A breakout is often accompanied by increased volume, signaling strong momentum.Read full glossary entry →.

Why It Matters

• Captures High-Velocity Moves: Pennants form in high-momentum assets, allowing traders to join fast-moving trends safely.
• Consolidation Filter: The converging trendlines show range compression, signaling that a breakoutBreakoutA price movement through an established support or resistance level. A breakout is often accompanied by increased volume, signaling strong momentum.Read full glossary entry → is imminent.
• Symmetrical Targets: Offers a clear projection target based on trendTrendThe general direction in which a security or market is moving over time.Read full glossary entry → symmetry (measured move).

Pattern Structure

A Pennant has two essential components:

1. The Flagpole: A sharp, vertical price spike representing aggressive buying.
2. The Pennant: A small symmetrical triangle with converging supportSupportA price level where buying pressure is strong enough to prevent the price from falling further. It represents a "floor" on the chart.Read full glossary entry → and resistanceResistanceA price level where selling pressure is strong enough to prevent the price from rising further. It represents a "ceiling" on the chart.Read full glossary entry → lines.

Trading Setup

The Pennant Breakout Entry

• Entry: Buy when a candle closes cleanly above the upper descending resistanceResistanceA price level where selling pressure is strong enough to prevent the price from rising further. It represents a "ceiling" on the chart.Read full glossary entry → line of the pennant.
• Stop-Loss: Place the stop-loss orderStop-Loss OrderAn order placed with a broker to sell an asset when it reaches a specific price, designed to limit a trader's loss on a position.Read full glossary entry → just below the lowest point of the converging pennant supportSupportA price level where buying pressure is strong enough to prevent the price from falling further. It represents a "floor" on the chart.Read full glossary entry → line.
• Target: Take the vertical height of the initial flagpole and project it upwards from the breakout trigger point.

Common Beginner Mistakes

[!WARNING]

• Trading Pennants Without a Flagpole: Attempting to trade converging lines in a slow, choppy market. Without a strong initial move, the pattern is just a random range-bound triangle and lacks continuation power.
• Ignoring VolumeVolumeThe total number of shares, contracts, or units of a security traded during a specified time period.Read full glossary entry → on Breakout: Buying breakouts that occur on low volumeVolumeThe total number of shares, contracts, or units of a security traded during a specified time period.Read full glossary entry →. Institutional participation is required to drive the second leg of the trendTrendThe general direction in which a security or market is moving over time.Read full glossary entry →.
• Placing Stop-Losses Too Close: Placing the stop-loss right at the breakout line. Normal re-tests will trigger the stop before the target is reached.