🎌 Pennants: Small Patterns, Big Moves
Pennants are continuation chart patterns — just like rectangles — that form after a strong price move in either direction.
After a sharp rise or drop, the market often pauses as traders catch their breath. During this pause, price consolidates into a small symmetrical triangle, which we call a pennant.
What Happens Next?
While price is consolidating inside the pennant, fresh buyers or sellers often jump in, fueling another breakout in the same direction as the original move.
📉 Bearish Pennant: Sellers Take a Breather… Then Strike Again
A bearish pennant forms during a steep downtrend.
After a strong drop, some sellers may lock in profits, while others prepare to jump in. This causes price to pause and form a pennant.
🖼️ Example: Bearish Pennant in Action
Once selling pressure builds up again, price breaks below the pennant, and the downtrend continues.
To trade this, you’d typically:
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Place a sell order just below the pennant
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Set a stop-loss above the top of the pennant
This way, if the breakout fails (a.k.a. a fakeout), you limit your losses.
💡 Unlike other patterns, where the breakout move is about the height of the pattern, pennants often lead to larger moves.
👉 Instead, measure the height of the initial sharp move (called the "mast") before the pennant formed — this gives you a better estimate of how far price might go after the breakout.
📈 Bullish Pennant: Bulls Rest Before Charging Higher
A bullish pennant forms during a strong uptrend.
After a quick surge, the bulls take a short breather. During this pause, price consolidates into a pennant… and then it’s off to the races again!
🖼️ Example: Bullish Pennant Breakout
After forming the pennant, the bulls regroup and push the price sharply higher once again.
To trade this setup:
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Place a buy order just above the pennant
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Put your stop-loss below the pennant’s bottom, in case of a fakeout
Just like with bearish pennants, use the mast height (the size of the move before the pennant) to estimate your profit target.
🧠 Key Takeaways
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Pennants = strong continuation signals, not trend reversals.
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They form after a big price move, followed by a brief consolidation.
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Breakouts are typically fast and strong — don’t let their small size fool you.
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Measure the mast (initial move) to project the likely breakout distance.
📣 Final thought:
These tiny triangles might seem insignificant, but when price breaks out of a pennant, it often bursts with energy.
So… don’t underestimate the power of the pennant! 💥