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Key Takeaways
- A pennant combines a sharp pole with a compact pause between converging boundaries.
- Flags have parallel pause boundaries; pennants have converging boundaries.
- The example has an $8.80 pole, a $54.10 pause low and a $62.90 low-anchored objective.
- Projecting from the $55.40 boundary instead gives $64.20; projecting from the $56.20 close gives $65.
- Enter on the break of the pause boundary, and size from the price you actually fill at.
- With a $54.09 stop, a $55.40 entry risks $1.31 a share and a $56.20 entry risks $2.11.
What is a pennant pattern?
A pennant pattern is a continuation chart pattern in which a sharp price move, the pole, is followed by a compact pause between converging boundaries. A bull pennant follows an advance and a bear pennant follows a decline. A break beyond the pause boundary in the direction of the pole activates the setup, and the pole length, projected from a chosen anchor, sets the measured-move target.
A Flag has parallel pause boundaries; a Symmetrical Triangle uses a broader set of converging swings.
Formula
Pole length = pole high − pole low; bull low-anchor target = pennant low + pole length; bear high-anchor target = pennant high − pole length; breakout-price alternative = selected price ± pole length- This bull example has a $48.20 pole base and $57 pole top, giving $8.80.
- The selected low anchor is $54.10; the bearish counterpart uses its pennant high.
- The breakout boundary, the confirming close and the entry fill are three different prices: $55.40, $56.20 and your actual fill.
- Two targets differ by exactly the distance between their anchors: $64.20 and $62.90 sit $1.30 apart, like $55.40 and $54.10.
Bull pennant example: pole and converging boundaries
A stock advances from $48.20 to $57, then forms a compact pennant. Its later highs are $56.47 and $55.93; its lows are $54.10, $54.50 and $54.90. At the breakout observation the upper line is $55.40 and lower line $55.10. The breakout close is $56.20.
- Pole length: $57 − $48.20 = $8.80
- Initial extreme-to-extreme distance: $57 − $54.10 = $2.90; simultaneous boundary separation at breakout: $55.40 − $55.10 = $0.30
- Low-anchor target: $54.10 + $8.80 = $62.90
- Boundary-anchor target: $55.40 + $8.80 = $64.20; close-anchor target: $56.20 + $8.80 = $65
- $55.40 entry and $54.09 stop: risk $1.31, target distance $7.50, ratio 5.73
- $56.20 entry and the same stop: risk $2.11, target distance $6.70, ratio 3.18
Price reaches $63.40, clearing the $62.90 low-anchored target by $0.50 while stopping $0.80 short of the boundary-anchored alternative. The final displayed observation is $62.80. Both entry plans use the same $54.09 stop below the pause.
The example’s pole advances from $48.20 to $57, a length of $8.80. The pennant then makes lower highs and higher lows. At the breakout observation, its upper and lower lines are $55.40 and $55.10.
The $57 peak and $54.10 first low are $2.90 apart at different observations. The simultaneous boundary separation at breakout is $0.30. The $2.90 measures the pause’s opening depth, and the $0.30 measures how tight it has squeezed by the breakout.
How to calculate a pennant target
The selected objective projects from the pennant low: $54.10 + $8.80 = $62.90. A boundary anchor gives $64.20, and the $56.20 closing-price anchor gives $65.
The first two targets differ by $1.30 because their anchors differ by $1.30. Name the anchor before the trade; it decides where you take profit.
Pennant entry and stop: two entry plans
Place the stop at $54.09, just below the $54.10 low. A $55.40 fill risks $1.31 and sits $7.50 from the low-anchored target, ratio 5.73.
A $56.20 fill risks $2.11 and sits $6.70 from the same target, ratio 3.18. Use the actual fill when calculating an executed trade.
The example reaches $63.40 and later finishes at $62.80. The high clears the selected $62.90 target by $0.50.
Bear pennant example
The reflected pole declines from $61.80 to $53. Its pennant high is $55.90. The selected $53.80 close breaks below the $54.60 lower boundary.
Projecting the $8.80 pole down from $55.90 gives $47.10. A $53.80 short entry with a $55.91 stop risks $2.11 and sits $6.70 from the target.
How traders use the pennant pattern
Compare participation with Relative Volume during the pole, the pause and the breakout. During the pause, Options Flow shows whether calls are being bought at the ask before the breakout, and the Options Profit Calculator prices each structure at the $62.90 objective across the expirations you test.
Limitations of the pennant pattern
- Wait for the breakout. Until it prints, the pause can also break against the direction of the pole.
- The target depends on its anchor. The same $8.80 pole gives $62.90, $64.20 or $65 in the example, so pick the anchor before the trade and take profit or trail a stop once price reaches it.
- Draw the boundaries with the same swing rule every time. Slightly different swing points move the lines and the breakout observation, and the boundary shape is what separates a pennant from a flag or a broader triangle.
- Size from the entry you actually take. Entering at the $56.20 close instead of $55.40 raises the planned distance from $1.31 to $2.11 and cuts the ratio from 5.73 to 3.18.
- Fix the chart interval before drawing the pattern. A pennant on one timeframe can be a minor pause on another.
Bottom line
A pennant is a short, converging pause after a sharp move that traders watch for a break in the direction of the pole. Define the boundaries and activation event before the break, name the target anchor, and size the trade from the actual fill and a stop beyond the pause.
Clear answers
Frequently Asked Questions
Sources and Further Reading
- CME Group Education: Trend and Continuation Patterns
- Fidelity Learning Center: Identifying Chart Patterns (Pennant/Flag construction and target)
- Fidelity Learning Center: Identifying Chart Patterns With Technical Analysis (transcript)
- Lo, Mamaysky and Wang, Foundations of Technical Analysis (NBER Working Paper 7613)
- Fidelity Technical Indicator Guide: Volume
How entries are sourced, calculated and updated: editorial methodology.