Pennant Chart Pattern: What Is It & How to Use It For Crypto Trading?

The pennant chart pattern is a consolidation pattern that falls under the trend continuation category. It is formed over a shorter duration than some chart formations and is typically seen in more aggressive trading environments. Typically, the pennant forms around the halfway point of a developing trend. A breakout of the pennant provides an entry signal in the direction of the trend.

In this article, we will review the identification and use of the pennant, how to trade the price formation and discuss the pennant relative to other common chart patterns.

What Is A Pennant?

The pennant chart pattern is a trend continuation pattern that occurs in both bullish and bearish markets. It is formed following a sharp advance of trend, either up or down, as the price starts to trade in a tightening range that takes the form of a small symmetrical triangle. Frequently, it occurs in the middle of a price move which identifies the beginning of the second half of a trend. 

It is a fairly common pattern and can occur relatively frequently in all time frames, but is seen more often in short-term timeframes. Pennants are similar to flag patterns as far as they each have a sharp rally creating a flagpole before the consolidation phase. Two trend lines identify the boundary of the pennant, with an upper trend line across the top angled downward and a lower trend line across the bottom angled upward so that they will cross at the apex of the triangle and point horizontally.