Pennant Definition. A Pennant is another technical pattern that analysts recognize as a signal based on previous price behavior. The pattern resembles a Flag and Pole formation except that the flag portion’s upper and lower levels are not parallel but each gradually slopes to a point, thereby forming a pennant (see chart below). The Pennant is a continuation pattern that is marked by a small consolidation before resumption of the previous trend. As with a Flag and Pole formation, the expectation is that the continued move will be equal to the size of the pole. Continuation implies that a previous strong trend has been observed. For stocks, heavy volume must also denote the previous trend, with a decline, followed by a breakout. For currencies, the forex trader cannot rely on volume statistics to confirm his basis for future projections. However, even though this pattern is considered “bullish”, the breakout can go either way. A prudent forex trader would arrange a combination “buy stop” and “stop loss” orders on either side of the respective resistance and support levels of the Pennant.
