Pennant in Trading: How the Continuation Pattern Works

A pennant in trading is a technical analysis pattern that is often compared to a flag. Both belong to continuation patterns, but with a pennant, after the impulse, the price does not move into a channel, but starts compressing into a small triangle. Visually, it really looks like a pennant on a flagpole.

This trading pattern shows that after a strong move, the market temporarily loses speed, but does not break the trend idea itself. The price compresses, volatility decreases, and market participants seem to be waiting to see which side will push the next phase of the move. If the context is strong, a pennant often ends with continuation of the impulse.

Example of pennant pattern in trading:

The beginner’s mistake is that they see a pennant in any small triangle. But a working pattern almost always appears after a noticeable impulse. If the market was simply moving sideways before that, then the model itself loses most of its practical meaning.

A pennant is usually used as a continuation scenario. First, traders assess the strength of the initial move, then they look at whether the range is becoming narrower, and after that they wait for a breakout from the compression. Buying or shorting inside the pattern is a common mistake, because the pattern is not completed yet and the market has not confirmed anything.

We covered which patterns are the most effective in the article: Patterns in Trading: Technical Analysis Patterns and Their Application.