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.
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.
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.
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.
5M, 15M, 1H, 4H
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.
Rising and falling wedges are converging trendline patterns where both support and resistance slope in the same direction. A rising wedge (both lines slope upward, converging) is typically bearish, while a falling wedge (both lines slope downward, converging) is typically bullish. Wedges differ from triangles because both trendlines slope in the same direction rather than converging symmetrically.
Measured move projections use the length of a prior price swing to forecast the target of the next swing in the same direction. The technique assumes market symmetry — that the second leg of a move will approximate the distance of the first leg. Measured moves apply to impulse waves, corrective patterns, and chart pattern breakouts, providing objective price targets that remove subjectivity from exit planning.
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.
Broadening patterns, also called megaphone or expanding patterns, form when price creates progressively higher highs and lower lows, diverging rather than converging. These patterns reflect increasing volatility and disagreement between buyers and sellers, often appearing during periods of uncertainty or at major market turning points. Broadening patterns are among the most challenging formations to trade because they lack the contracting structure of typical chart patterns.