Trading
A sharp move, a small symmetrical pause, then usually a continuation in the same direction.
What you are looking at
A near vertical move forms the pole, followed by a brief triangle of converging highs and lows on falling volume. It is a flag with converging rather than parallel edges.
How traders act on it
A close out of the pennant in the direction of the pole is the trigger, with the pole height projected from the break as the rough target.
When it fails
A pennant that takes a long time to resolve, or drifts back down through the pole, is no longer a pause. The whole pattern depends on the pause being brief.
Failure is normal and it is not a problem, provided you decided your invalidation level before entering and sized the position so that being wrong is survivable. See risk management.
Context that changes the odds
| Factor | Improves the setup | Weakens it |
|---|---|---|
| Higher timeframe trend | Pattern agrees with the daily or weekly direction | Pattern fights the larger trend |
| Volume | Expands on the breakout | Breakout happens on thin volume |
| Duration | Formed over many candles | Formed over three or four candles, which is mostly noise |
| Level confluence | Trigger sits at a well tested level | Trigger sits in empty space with no history |
| Market conditions | Trending, orderly market | Choppy range, where nearly every pattern fails |
Other patterns
Common questions
What is the difference between a pennant and a flag?
How long should a pennant last?
Where to go next
Practice spotting these
We go through live charts together and separate the real setups from the shapes your brain wants to see. That second skill is the harder one.