Pennon Pattern

Flag and pennant are two short-term patterns that usually form during a brief pause in a strongly trending market. A moderate movement in the opposite direction to the main trend characterizes the pattern. Again, using bar charts, this period can last from three to seven days before a sharp breakout in the direction of the original trend is seen.

Example of an ascending "pennon"

Example of a descending "pennon"

A pennant is very similar to a flag, but instead of the sluggish pullback, market volatility decreases and price movement remains in line with the trend showing no evidence of retracement. Two points to note are 1) the pennant phase may last longer than the flag and 2) the pennant may take the form of triangles.

Pennant Pattern

Similar to the Flag chart formation, the pennant continuation pattern is guided by almost the same principles. The only difference between the two is that the support and resistance lines converge, which makes this continuation pattern to appear as a pennant.

Pennants can be either bullish or bearish. A chart pattern of a bullish pennant is observed when the original trend is bullish as well. On the other hand, a bearish pennant is observed under the conditions of a going down original trend. In both cases it is vital that the movement of the price preceding the pennant formation be a solid, steep move.

The pennant direction is not that important as is the case of the flag pattern, though generally the pennant is flat.

The pennant continuation pattern is considered complete when the breakout of the price is in the same direction of the steep price movement prior the formation. Additionally, there has to be heavy market volume during the breakout in order to confirm the chart pattern.

Flag Pattern

Shaped like a flagpole with a pennant, this formation is characterized by an upward movement with a large slope followed by a period of consolidation. It is considered a bullish pattern overall, as the pattern is expected to continue rising.

Example of an ascending "flag"

Example of a descending "flag"