The pennant is similar to a flag but the consolidation takes the form of a small symmetrical triangle rather than a parallel channel. The flagpole is the same sharp impulsive move; what differs is how price consolidates — converging into a tighter and tighter range before breaking out.
The converging trendlines of the pennant represent compressed energy. Both buyers and sellers are making smaller and smaller moves — the range is tightening. This compression typically precedes an explosive directional move. Unlike a symmetrical triangle that can break either way, the pennant forms after a clear directional move and is biased to break in the same direction as that move.
Key insight: The pennant and the flag are sometimes confused. The difference is the shape of the consolidation — parallel channel for a flag, converging triangle for a pennant. Both are valid continuation patterns. When in doubt, trade the breakout in the direction of the prior move and let price tell you whether the continuation is real.
The other half is what’s happening in your head when you’re in the trade. Fear, ego, revenge trading, breaking your own stops — that’s where most accounts actually lose money. Not bad setups.