Pennant Pattern

What Is a Pennant Pattern?

A pennant is a short-term continuation pattern that forms after a strong, steep price move. It resembles a small symmetrical triangle, with converging trendlines that create a triangular shape following the initial impulse (flagpole). The pattern indicates a brief consolidation period where the market catches its breath before the trend resumes.

The pennant is closely related to the flag pattern. While flags consolidate in parallel channels, pennants consolidate in converging trendlines. Both share the same underlying dynamics: a strong impulse, a brief pause with declining volume, and a continuation breakout.

How to Trade the Pennant

The breakout from the pennant is the entry signal. For bull pennants, enter when price breaks above the upper converging trendline. For bear pennants, enter on a break below the lower trendline. Volume confirmation is essential: the breakout candle should show a significant increase in volume compared to the declining volume within the pennant.

The stop loss goes on the opposite side of the pennant. For bull pennants, this is below the lower trendline or the lowest point of the pennant. The measured move target equals the length of the flagpole projected from the breakout point, identical to the flag pattern methodology.

Pre-breakout positioning is an advanced technique where traders enter within the pennant when they are confident in the direction. The advantage is a tighter stop loss and better entry price. The risk is that the pennant breaks in the unexpected direction, which occurs roughly 30-40% of the time.

Pennant vs. Triangle

The key distinction between a pennant and a symmetrical triangle is duration and context. Pennants form quickly (one to three weeks) after a clear impulse move. Symmetrical triangles develop over longer periods and may not follow a distinct impulse. This difference in context affects the expected breakout: pennants have a stronger directional bias because the preceding momentum provides the energy for continuation.

If a pattern that initially looks like a pennant extends beyond three to four weeks, reclassify it as a symmetrical triangle and adjust expectations accordingly. The longer the consolidation, the less powerful the eventual breakout tends to be relative to the flagpole.