What is a pennant pattern?

Pennants are continuation patterns where a period of consolidation is followed by a breakout used in technical analysis. It's important to look at the volume in a pennant—the period of consolidation should have lower volume and the breakouts should occur on higher volume.

What is a pennant in technical analysis?

A pennant is a continuation pattern in technical analysis formed when there is a large movement in a security, known as the flagpole, followed by a consolidation period with converging trend lines - the pennant - followed by a breakout movement in the same direction as the initial large movement, which represents the second half of the flagpole.

Why do traders use pennants?

Most traders use pennants in conjunction with other forms of technical analysis that act as confirmation. Pennants, which are similar to flags in terms of structure, have converging trend lines during their consolidation period and last from one to three weeks. The volume at each period of the pennant is also important.

When should a pennant breakout occur?

The breakout after a pennant pattern should occur at or near the point where the trendlines converge, called the apex. When dealing with a symmetrical triangle, however, it is optimal for price to break above or below the trendlines one-half to three-quarters of the way through the pattern.