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.
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.
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.
The cup and handle is a bullish continuation pattern resembling a teacup when viewed from the side. The cup forms as a rounded bottom with the left and right rims at approximately the same level, followed by a small downward-drifting consolidation (the handle). A breakout above the handle's resistance triggers the measured move, calculated from the bottom of the cup to the rim.
Bull and bear flags are continuation patterns consisting of a sharp price move (the flagpole) followed by a brief, counter-trend consolidation channel (the flag). Bull flags slope downward after an upward pole; bear flags slope upward after a downward pole. These patterns represent a pause in strong momentum before the trend resumes, and they are among the most commonly traded continuation setups.