Pennant Pattern: Continuation After A Sharp Move

A pennant is a small triangle that forms after a sharp price move. Two trendlines converge. Volume dries up inside the consolidation. Then price breaks out in the direction of the original move and runs again.

Pennants are a pause. The first leg ran hard. Buyers and sellers needed a minute to figure out who was right. The pennant is the negotiation. The breakout is the resolution.

What The Pattern Looks Like

• Flagpole: the initial sharp move. Steep angle. High volume.
• Pennant: tight consolidation. Two converging trendlines forming a small triangle.
• Duration: usually one to four weeks on a daily chart. Few hours to a day on intraday.
• Volume: declines through the pennant. Picks up on the breakout.

The Entry

I wait for the breakout candle to close beyond the upper trendline on volume. Not a wick. The candle body has to close above. That filters most fakeouts.

If price closes above and pulls back to the breakout zone, that retest is the cleanest entry. Lower risk because the stop sits right under the breakout level.

The Stop

Stop goes below the pennant low. If price reenters the pattern, the breakout failed. No reason to hold.

Tighter stops live just below the breakout level. That catches more false breakouts but loses less per loser.

The Target

Measure the flagpole. Project that same distance from the breakout point. That is the measured move target.

Example: stock runs from $40 to $50 (flagpole is $10). Then it consolidates between $48 and $50 for two weeks. Breakout at $50. Target is $60.

I take partial profits at the measured target. Trail the rest if the trend is still healthy.

What Kills The Pattern

• Pennant takes too long. Over six weeks and it stops being a pause. It becomes a range.
• Breakout on no volume. Buyers did not show up. The move probably fails.
• Pennant forms after a slow move. The setup needs the flagpole to be sharp.
• News overrides the chart. Earnings, Fed, macro events break technical patterns.

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