Pennant

What it is

A pennant is a short continuation pattern. After a sharp move — the flagpole — price pauses in a small triangle with lower highs and higher lows. The lines converge. The pattern completes when price closes outside the pennant, usually in the direction of the pole.

A pennant can be bullish (after a rally) or bearish (after a drop). The shape is the same; only the direction changes.

Why it forms

A fast move leaves both sides uncertain. Early participants take profit, latecomers hesitate, and price coils as each swing gets smaller. Shrinking volume shows neither side is committing. When one side finally pushes through a line, the other side’s stops and the waiting money add fuel.

How to identify it

• A sharp, clear flagpole.
• A small, compact triangle — short in time compared with the pole.
• Converging trendlines: lower highs on top, higher lows underneath.
• Volume contracting during the pennant.

What confirms it

A candle close outside the pennant, ideally in the direction of the pole and on rising volume.

What invalidates it

• A decisive break in the opposite direction of the pole.
• The pennant drags on and grows into a larger triangle — then read it as a symmetrical triangle instead.

Common mistakes

• Assuming the direction. Pennants usually continue, but you still wait for the break.
• Confusing it with a large triangle. A pennant is small and quick relative to the pole.
• Trusting a low-volume break. Without participation, breaks often fail.
• Treating the pole projection as a target. It is a guide for scale only.