A Pennant is basically a variant of a Flag where the area of consolidation has converging trend lines, similar to a Triangle.

The Pennant is a neutral formation. Whether the trend reverses or continues based on the pattern heavily depends on the context of the pattern.

It appears as a small wedge after a steep trend, which develops in the opposite direction.

After an uptrend it has a downward slope and after a downtrend, an upward slope

A Pennant is usually a method of pattern trading based on a continuation pattern.

A pennant is a price pattern where the price starts to range and the difference between the peaks and troughs start to decrease, in a horizontal manner and show similar features to a symmetrical triangle.

When the price breaks out of the pattern it usually continues in the same direction, showing no signs of confusion as to where it should be.

A pennant is a continuation chart pattern formed when there is a large movement in price, described as the” first flagpole“, followed by a consolidation period with converging trend lines, described as the “pennant“, followed by a breakout in the same direction as the initial large movement, which can be described as the “second flagpole“.

A pennant is a small symmetrical triangle that begins wide and converges as the pattern matures (like a cone).

Continuation patterns indicate a pause in a trend and indicate that the previous direction will resume after a period of time.

Pennants are in the shape of a triangle, but much smaller.

While triangles have swing highs and lows as the price oscillates back and forth, a pennant’s price action will be confined within a range or consolidation that gets even smaller over time.

Pennants are preceded by sharp price increases or decreases and show the market is taking a breather before possibly resuming its trend.

Short-term continuation patterns that mark a small consolidation before the previous move resumes.

These patterns are usually preceded by a sharp advance or decline with heavy volume,

Pennants, which are similar to flags in terms of structure, have converging trend lines during their consolidation period.

The volume of the pennant is important.

The initial price that forms the first flagpole, should be supported with large volume.

The pennant should have weakening volume, followed by a large increase in volume during the breakout.

A continuation pattern is a chart pattern that leads to the continuation of an existing trend.

Continuation patterns include Ascending Triangles, Descending Triangles, Wedges, Flags, Symmetrical Triangles, and Pennants.

Although a Pennant will act in a similar nature to a Flag pattern, the actual look of the trend is more like a Triangle pattern.

Breakouts happen in both directions but virtually all pennants are continuation patterns

This means that pennants in an uptrend are expected to break out upward and those in a downtrend, downward.

Pennant performance strongly depends on the initial price change as defined by the pennant’s pole.

Pennant vs. Symmetrical Triangle

At first glance, a bullish Pennant may appear to look very much like a Symmetrical Triangle but on closer inspection, it is typically of a smaller size and duration with volume tending to contract during the pause and then increase on the breakout.

The Pennant is also not considered to be as volatile as a Symmetrical triangle.

The Pennant is often interpreted as a brief pause occurring in a strongly trending market and it is considered that the movement following the completion should duplicate the move preceding completion of the pennant.

A symmetrical triangle is a chart pattern characterized by two converging trendlines connecting a series of sequential peaks and troughs.

The two differ by the duration and the appearance of a ‘flagpole’

A bullish Pennant, one that performs on an uptrend will result in prices that break higher while a bearish pennant will result in breaking at a lower level.

How to Trade Pennants

Many traders look to enter new long or short positions following a breakout from the Pennant pattern.

For example, when a bullish Pennant forms, you can place a limit buy order just above the Pennant’s upper trendline.

Another approach is to first wait until the price breaks out, then look for above-average volume to confirm the breakout. Only then would you go long.