Chart patterns · Intermediate

Pennant Patterns

A sharp thrust, a tight coil, and the point where dealing cost eats more of the trade than the structure is worth.

Last reviewed 15 September 2026 by the MarketPro research desk · Editorial policy

In short

A pennant is a short continuation pattern: a sharp directional move (the pole) followed immediately by a small converging consolidation that looks like a miniature symmetrical triangle. It is generally read in the direction of the pole and confirmed by a close beyond the converging lines. The pole length is commonly projected from the breakout point as a rough objective.

What to remember

Converging lines make it a pennant; parallel lines make it a flag. Context and duration separate it from a symmetrical triangle.
Check the spread against the width of the coil. If dealing cost is a third of the structure, the pattern is not tradeable on that instrument.
The full pole projection is the most optimistic reading available, and a 7 to 1 ratio on a 30 dollar idea is still a 30 dollar idea.
A tight coil before a scheduled release looks identical to a pennant and is an event trade, not a structural one.

Lesson 11 of 22 in Chart patterns

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A pennant is a small converging consolidation that forms immediately after a sharp directional move. The move is the pole, the tight triangle that follows is the pennant, and the pattern is generally read in the direction of the pole. It differs from a flag in shape (converging lines rather than parallel ones) and from a symmetrical triangle in context and duration: a pennant follows a thrust and resolves in a handful of bars.

Why the shape converges

A pennant is what a market looks like when a sharp move runs out of immediate sellers or buyers but nobody wants to take the other side either. The first pullback after the thrust is the largest, because that is when profit-taking is heaviest. Each subsequent swing is smaller, because there are fewer positions left to close and no fresh flow arriving in either direction. The lines converge because participation is draining, not because anyone has decided anything.

That is the useful mental model, and it explains the pattern's two characteristics at once. It is short, because drained participation is a temporary state. And it is directional, because the imbalance that produced the pole has not been resolved, only paused.

A six pip coil on USD/JPY

Say USD/JPY runs from 155.00 to 156.20 inside an hour, a 120 pip pole. Over the next eight bars it coils: a pullback to 155.80, a bounce to 156.05, a dip to 155.88, a bounce to 155.98, a dip to 155.92. The highs are falling and the lows are rising, and by the end the whole range is 6 pips wide.

Price closes above the upper line at 156.00 and you enter at 156.02. Invalidation sits below the last two lows of the coil, at 155.85, which is 17 pips of risk. The conventional objective projects the pole from the breakout: 156.02 plus 120 pips is 157.22.

That prices at roughly 7 to 1 on paper, which should immediately make you suspicious, and the suspicion is warranted. Three things degrade it. Spread on USD/JPY of around 1 pip is nearly 6 percent of the stop, paid on the round turn whether the trade works or not. Slippage on a breakout entry in a fast market is real and unmeasured. And the full pole projection is the most optimistic reading available, which most pennants do not deliver. Convert the objective into cash on the profit calculator and the stop into cash on the pip calculator, because a 7 to 1 idea worth 30 dollars is not the same thing as a 7 to 1 idea worth 300.

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The problem with small patterns

Everything good about a pennant comes from its tightness, and so does everything bad. A 17 pip stop lets a modest account take a reasonable position, and it also sits inside the range of a single ordinary bar during a busy session.

There is a threshold below which the pattern stops existing. If the coil is 6 pips wide on an instrument with a 2 pip spread, a third of the structure is dealing cost and the lines you have drawn are inside the noise of the quote itself. On exotic pairs and on some index CFDs the spread is wider than the entire pennant, which means the pattern is not tradeable there no matter how neat it looks on a mid-price chart. Check the spread before you check the shape.

A coil before news is not a coil after a pole

The pole was a scheduled release. A 120 pip move on an inflation print is a repricing, and a repricing has a natural end. The coil that follows is often just the market settling at the new level, with no continuation behind it.
There are not enough bars. Two swings do not make a converging pattern, they make a wobble. If you need to ignore a bar to draw either line, you are drawing a preference.
It coils before news rather than after a pole. Markets go quiet and tight in the fifteen minutes before a high-impact release. That shape is a pennant to the eye and an event trade in reality, and the break will be driven by data rather than structure. The session and release timetable tells you which one you are looking at.
It drifts sideways for hours. A pennant that outlasts its pole by a wide margin has become a range, and the directional bias has expired with it.

The order of operations, and the spread check

Work in this order and the pattern behaves. Find an impulsive move first and measure it. Confirm the consolidation is genuinely converging rather than parallel, and that it is short relative to the pole. Draw both lines while price is still inside them. Then check the spread against the width of the pennant, and if dealing cost is more than about a tenth of your intended stop, pass.

Set the trigger just beyond the line in the pole's direction, the invalidation at the far side of the pennant, and take a first objective well short of the full pole projection. Pennants are among the more forgiving continuation patterns when the context is right, and among the easiest to over-trade when it is not, which is the general warning attached to every small pattern in forex trading strategies.

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Written and reviewed by the MarketPro research desk

MarketPro is a trading-signal and trading-education app operated by Harajuku Holdings LTD (Cyprus). Our signal desk publishes and tracks every trade idea in-app, and every page here is checked against the app's live behaviour before publishing. Last reviewed 15 September 2026. How we produce signals and content · About MarketPro

FAQ

Pennant Patterns: questions

What is the difference between a flag and a pennant?

Both are short consolidations after a sharp move, and both are read in the direction of that move. The difference is the shape of the pause: a flag is bounded by two roughly parallel lines and usually drifts against the trend, while a pennant is bounded by two converging lines and coils towards a point. In practice they are traded almost identically, with the trigger at the boundary and the stop on the far side of the consolidation.

How long should a pennant last?

It should be short relative to the pole that produced it, typically a small number of bars on the timeframe you are watching. The reasoning is that a pennant represents participation draining out of a market temporarily, which is not a state that persists. Once the consolidation has run substantially longer than the move it followed, it has become a range and the directional bias attached to the pole has expired.

Are pennants reliable on lower timeframes?

The shape appears on every timeframe, but on one and five minute charts the coil is often narrower than the spread plus normal slippage, which means you are drawing lines inside the noise of the quote. The test is mechanical rather than aesthetic: compare the width of the pennant and your intended stop with the dealing cost on that instrument. If costs are a large fraction of the risk, the edge the shape might carry is already spent.

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