Pennant pattern
Also called: Pennant, Bull pennant, Bear pennant, Flama formasyonu, Flama
A small pause with converging edges right after a sharp move; it shows the trend catching its breath, and the break tells you the direction.
4 min read · one puzzle on the page
What does a pennant tell you?
A pennant is a small, narrowing pause that comes right after a sharp move. It has two parts: the pole and the pennant itself. The pole is the move, a run of large-bodied candles. The pennant is the handful of small candles that follow; highs dip a little, lows lift a little, and the edges close in like a tiny triangle.
The message is the same as a flag's: whoever made the move is still in charge. If price answers a sharp drop with only a weak, small-candled bounce, buyers can't find the strength to carry it higher. Sellers have banked some profit and stepped aside, waiting for a slightly better price to get back in.
The difference from a flag is the shape. In a flag the edges of the pause run parallel; in a pennant they converge. The difference from a symmetrical triangle is size: a pennant is small, short-lived and always has a pole in front of it. No pole, no pennant, just an ordinary squeeze.
How do you spot a pennant on a chart?
Start with the pole. Say price fell from 1.2700 to 1.2550 in six candles: a 150-pip drop on long bodies and short wicks. That's the pole. Price should have actually travelled, not drifted.
Then look at the pause. Price bounced to 1.2600, taking back 50 pips, a third of the drop. Candles shrank; highs step down at 1.2600, 1.2590, 1.2580 while lows lift at 1.2555 and 1.2562. The two lines are converging, and that's the pennant. A healthy one gives back only a small part of the pole. A bounce that reclaims half of it is no longer a pause.
Confirmation is a close through the pennant's edge in the pole's direction, here a candle closing below the lower edge. A wick poking out isn't enough. If you can see volume, expect it heavy on the pole and light in the pennant.
The logical stop sits a little above the pennant's high. Sell the break at 1.2555 with a stop at 1.2605 and you're risking 50 pips; that's your 1R. If price clears the top of the pennant, the bounce is no longer weak and your idea is wrong. Projecting the pole's length from the break is the textbook calculation, but treat it as a rough reference at most.
Try it on a chart
Don't hunt for a neatly narrowing pennant on this chart; it shows the core of one: a weak, small-candled bounce after a sharp drop. Look at how strong the drop was, how much of it the bounce has taken back and how big the candles are, then decide where your idea would be proven wrong.
Your turn: read the chart and make your call.
No sign-up needed. Take a guess; when the chart opens, you'll see why.
The most common mistake
Reading a weak bounce as a reversal. After a sharp drop, the first green candles look tempting to buy. But a bounce on small candles shows sellers resting, not buyers getting stronger. Trying to catch the falling knife puts you against the trend too early, and the stop usually comes with the next leg.
Calling every small triangle a pennant. With no strong pole in front of it, or a squeeze that lasts far longer than the pole itself, you may be looking at the start of a new range rather than a pause.
Entering at the tip of the breakout candle. Sell the low of the big red candle that cracks the lower edge and your stop above the pennant is further away than you planned. Because pennants are small the gap is often modest, but work it out before you enter and size the position to match.
When doesn't it work?
A pennant is a continuation pattern, so if the trend behind it is exhausted there's nothing left to continue. A pennant in the fourth or fifth leg of a long decline is less reliable than one in the first, because fewer traders are left wanting to sell.
A pennant that drags on loses its edge. If the pole took six candles and price has been squeezing for thirty, it's no longer a short pause. The edges get so close that the break comes on a twitch and says very little.
Also check what the pole ran into. If the sharp drop stopped just above a strong support, the break may run into buyers waiting there. A pole made by a news release is different too; the pause after a news candle is sometimes the market digesting the news rather than continuation.
Frequently asked questions
Is a pennant bullish or bearish?
Neither by itself; a pennant tends to continue the direction of its pole. After a sharp rally it's a bull pennant and points to continuation higher. After a sharp drop it's a bear pennant. What confirms the direction is a close through the pennant's edge in the pole's direction; until then the pattern is only a possibility.
What is the difference between a pennant and a flag?
Both are short pauses after a sharp move, and the trading logic is the same. In a flag, the upper and lower edges of the pause run roughly parallel, like a small channel. In a pennant, the edges converge into a small symmetrical triangle. In both, the stop goes a little beyond the far side of the pause.
Is a pennant the same as a symmetrical triangle?
They look alike but aren't the same. A pennant is small, short and always follows a sharp pole. A symmetrical triangle is a larger, longer squeeze that doesn't need a pole in front of it. What makes a pennant a pennant isn't the triangle shape but the sharp move before it.
