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A pennant is a short-term continuation pattern that forms after a strong price move (the flagpole). Instead of a rectangular flag, the consolidation converges into a small symmetrical triangle, with a rising lower trendline and a falling upper trendline meeting at a point. It signals a brief pause before the prior trend likely resumes. Pennants can be bullish or bearish depending on the direction of the preceding move.

It depends on the trend it forms in. A bullish pennant follows a sharp rally and typically breaks upward, continuing the uptrend. A bearish pennant follows a sharp decline and typically breaks downward, continuing the downtrend. The pennant itself is just a converging consolidation; the preceding flagpole determines the expected direction. Confirmation comes on the breakout, since patterns indicate probability rather than certainty.

Both are continuation patterns that follow a flagpole and represent a pause in the trend, but their consolidation shapes differ. A flag is a small parallel channel that slopes against the trend. A pennant is a small symmetrical triangle whose trendlines converge toward a point. Flags have roughly parallel boundaries; pennants narrow. Otherwise they are traded similarly, using the flagpole for the measured-move target.

Traders generally wait for price to break out of the converging pennant in the direction of the prior trend, entering on the breakout or a brief retest. The measured-move target projects the flagpole’s height from the breakout point. A stop-loss is often placed on the opposite side of the pennant. Volume usually contracts inside the pennant and expands on the breakout. CFD trading carries a risk of loss.

First spot a strong, near-vertical flagpole move. Then look for a small consolidation where highs are falling and lows are rising, forming converging trendlines and a triangular shape, on declining volume. A bullish pennant sits after a rally; a bearish pennant after a sell-off. The pattern is usually brief. It is confirmed only when price breaks out of the converging lines in the trend’s direction.

A common mistake is trading the breakout too early or in the wrong direction; a pennant is a continuation pattern, so the higher-probability break is with the prior trend, not against it. Traders also confuse a longer, more balanced symmetrical triangle for a quick pennant, or ignore volume. Waiting for a confirmed breakout with expanding volume and using a stop-loss helps avoid false moves in fast markets.