Pennant Pattern

A short-term continuation pattern similar to a flag, but with converging trendlines forming a small symmetrical triangle after a strong initial move.

The pennant is a close cousin of the flag pattern. It also requires a sharp initial move (the flagpole) followed by a brief consolidation, but instead of consolidating in a parallel channel, price forms a small symmetrical triangle with converging trendlines — narrowing toward a point as trading range compresses. This compression reflects decreasing volatility and balanced buying and selling pressure before the pattern resolves.

Like the flag, the pennant is a continuation pattern: the prior trend is expected to resume when price breaks out from the pennant in the direction of the original flagpole. The breakout target is the height of the flagpole added to the breakout point. Entry is on the breakout from the converging trendlines; the stop is placed on the other side of the pennant.

The pennant and flag are distinguished primarily by the consolidation shape — parallel channel vs. converging triangle — and can be treated almost identically from a trading standpoint. Both are short-duration patterns (days to a few weeks at most) that represent high-probability, well-defined setups when they appear within strong trends on liquid instruments. Both should form on declining volume during the consolidation and break out on volume expansion.

This definition is for informational and educational purposes only. Nothing on Finance Compass constitutes financial, investment, or trading advice. Always conduct your own research and consult a qualified professional before making financial decisions.