Pennant pattern in crypto trading: a complete guide from theory to practice

Pennant — what it is and why traders are obsessed with it

A consolidation figure that appears in the middle of a trend and looks like a small symmetrical triangle. Before the Pennant, there is a sharp and aggressive price movement (flagpole), then it narrows into a range, and then — boom, a breakout in the direction of the original trend.

Pennants occur on all timeframes but are more common on short-term ones. They form quickly — a maximum of 3 weeks, otherwise they will turn into a larger pattern or break.

How to recognize it

Flagpole is a vertical sharp movement upwards (bull pennant) or downwards (bear pennant). Typical scenario: the price soared or fell with strong volume.

Consolidation — two intersecting trend lines form a triangle:

• The upper line looks down.
• The bottom line looks up
• They converge at a point

Volume — during the formation of the pennant, the volume decreases, but upon breakout, it jumps sharply. This is a key signal.

Entry Strategies

1. Classic breakout — we enter immediately as the triangle boundary is broken in the direction of the trend
2. On the rebound — we await the first pullback inside the Pennant and enter for continuation
3. At maximum/minimum — we fix exact levels and enter when they are broken.

How to Count the Target

We measure the height of the flagpole ( from the start to the top/bottom ). This distance is measured from the breakout point in the direction of the trend.

Example of a bearish Pennant:

• The flagpole fell from $6.48 to $5.68 ( drop $0.80)
• The breakthrough occurred at $5.98
• Target level: $5.98 − $0.80 = $5.18
• Stop throwing a little above the resistance line

How reliable is the Pennant

Murphy (classic technical analysis) considers it one of the most reliable patterns. However, Bulkovsky conducted statistics on 1600+ Pennants and obtained more prosaic results:

• Trend Reversals: 54% (both up and down)
• Successful signals: 35% (long ), 32% (short )
• Average movement after entry: ~6.5% of initial movement

Output: pennants work, but they are not a magic kick. A strict risk management system is needed, along with a combination of other analysis tools (levels, volume, indicators).

Pennant vs other patterns

Vs Pennant: they are similar like brothers, but the flag has the shape of a rectangle, the pennant - a triangle.

Vs Symmetrical Triangle: both are triangular, but the pennant needs a steep flagpole before consolidation. The triangle just needs some trend.

Vs Pennant: a pennant can be both a reversal and a continuation. A pennant does not need a flagpole at all.

Bullish vs Bearish

Bullish: upward trend → sharp rise → pennant → breakout upwards → long position

Bearish: downtrend → sharp decline → pennant → breakdown → short position

The tactic is the same, only the direction of entry changes.

The Main Rule

The quality of the trend before the pennant is everything. An aggressive movement preceding the consolidation is highly likely to continue after the breakout. If the flagpole is sluggish and weak, the pennant will be questionable.

When trading a Pennant, remember: this is a short-term pattern, working time is a maximum of 3 weeks. If it drags on — it's a trap.