I've noticed that many newcomers to crypto overlook one of the most useful patterns for trading. It's about the pennant—a figure that helps catch the continuation of a trend when others are still uncertain.

In trading, a pennant is essentially a consolidation that appears after a sharp price movement. Imagine: the price suddenly surges or drops (this is the flagpole), then begins trading within a narrow range, forming a small triangle. Usually, this occurs somewhere in the middle of a trend, signaling the start of the second half of the movement.

What's interesting is that a pennant forms quite quickly, within a maximum of three weeks. This is a short-term pattern, so it is often seen on smaller timeframes. Two trendlines form the boundaries: the upper slants downward, the lower slants upward, and they converge at a point. It looks simple, but it works.

The breakout usually occurs in the direction of the previous trend. The key here is the aggressiveness of the movement before consolidation. If the trend was strong and sharp, the breakout from the pennant will be significant. A weak trend before the pattern results in a weak breakout afterward.

Trade entries can be made in several ways. The first is to enter immediately upon breaking the pennant boundary in the trend's direction. The second is to wait for a breakout of the pattern's maximum or minimum. The third is to enter on a pullback after the initial breakout. Each trader chooses based on their style.

Measuring the target is simple: take the height of the flagpole (from the start of the movement to the consolidation point) and project this distance from the breakout point. For example, if the flagpole was $0.80, and the breakout occurred at $5.98, then the target will be $5.18. The stop-loss is placed just outside the pennant boundary.

Now about reliability. John Murphy, in his classic book, calls the pennant one of the most reliable continuation patterns. But Thomas Bulkovski analyzed over 1,600 examples and showed more modest results—success rate around 35-32%, depending on the direction. This highlights why risk management is critical.

A bullish pennant occurs in an uptrend—sharp rise, then consolidation, then continuation upward. A bearish pennant is the opposite—sharp fall, consolidation, then continuation downward. The approach is the same; only the directions differ.

It's best to use the pennant not in isolation but in combination with other technical analysis tools. This increases the chances of success. And remember— the quality of the trend before the pattern determines the quality of the breakout afterward. Aggressive trading before consolidation often continues after the breakout.