Pennants
Overview
Pennants are short-term continuation patterns that form after a strong directional move. They resemble small symmetrical triangles, with converging trendlines creating a compact consolidation zone. Unlike flags, which have parallel channels, pennants converge to a point. The breakout typically occurs in the same direction as the preceding move, with the measured target based on the flagpole.
Key Concepts
Small symmetrical triangle following a sharp price move (the pole). Converging trendlines with decreasing range over a short period. Volume declines during formation and surges on breakout. Duration is typically brief — a few candles to a couple of weeks. Bullish pennants form after upward poles; bearish pennants after downward poles.
Entry Signals
Enter on a breakout from the pennant in the direction of the prior pole with volume expansion. Use the converging trendlines as a reference for tight stop placement. The pole should represent a strong, impulsive move on well-above-average volume. Confirm with short-term momentum indicators aligning with the breakout direction.
Exit Signals
Measured-move target equals the length of the pole projected from the breakout point. Place stops on the opposite side of the pennant. Partial profits at 50% of the measured move, trailing the remainder. If the breakout fails and price re-enters the pennant, exit and reassess.
Best Timeframes
5M, 15M, 1H, 4H
Pro Tips
Pennants are most reliable when they form quickly — extended formations lose their continuation bias and may resolve as symmetrical triangles instead. The impulse pole should be visually obvious and accompanied by significantly elevated volume. Pennants that form during the third or fourth leg of a trend are less reliable than those in early trend stages.
More Topics in This Category
Ascending & Descending Triangles
Ascending triangles form when price creates a horizontal resistance line at the top and a rising support trendline at the bottom, indicating buyers are becoming more aggressive. Descending triangles feature a horizontal support floor with a declining resistance trendline, suggesting sellers are gaining control. Both patterns are typically continuation patterns that resolve in the direction of the prevailing trend with a measured move target equal to the triangle's height.
Rectangle Patterns
Rectangle patterns form when price trades sideways between two parallel horizontal lines — a clearly defined support and resistance. Rectangles represent a period of equilibrium where buyers and sellers are evenly matched. The pattern resolves when price breaks decisively through one of the boundaries, often continuing in the direction of the prior trend.
Triple Top & Triple Bottom
Triple tops and triple bottoms are reversal patterns where price tests the same level three times before reversing. They are essentially double tops and bottoms with an additional test, making them rarer but potentially more significant. The three-touch structure confirms that a price level is acting as a strong barrier, and the eventual break of the pattern's support or resistance level triggers the reversal.
Head & Shoulders
The head and shoulders is one of the most reliable reversal patterns in technical analysis. It consists of three peaks — a higher central peak (the head) flanked by two lower peaks (the shoulders) — connected by a neckline drawn across the reaction lows. A break below the neckline confirms the reversal, with the measured target equal to the distance from the head to the neckline projected downward from the breakout point.