Bearish Pennant and Bullish Pennant — Trading the Pause

By Uladzimir Leuchankou, founder of Signal2Forex · 4 November 2026

A bearish pennant is a small triangle that forms right after a sharp fall. The price rests for a few bars, the swings get narrower, and then the fall usually goes on. A bullish pennant is the same shape after a sharp rise. Both are continuation patterns — a short pause inside a move, with the next leg expected in the direction of the first one.

What is a pennant on a chart? Most guides call it a small symmetrical triangle with a flagpole in front of it. That is a fair answer. For me, though, a pennant is a question the market asks after a fast move — are the sellers only resting, or have they already left? The bear pennant pattern is how a chart shows that they are resting.

Every bullish and bearish pennant pattern has three parts. First comes the pole — a fast, almost straight move over a few bars. The second part is the pennant itself, small candles squeezed between two lines that meet. Last is the break, when a candle closes outside the lines in the direction of the pole.

Anatomy of a bearish pennant

The pole matters more than the triangle. In a bearish pennant it is a fall that looks out of place on the chart — several long red candles in a row, short wicks, almost no rest between them. Thomas Bulkowski, who has studied chart patterns on stocks for decades, writes on his pennant page that the pole should be unusually steep and last several days. If you have to search for the fall, it is not a pole.

Then the price stops. Each bounce is smaller than the one before it. The highs come lower, the lows come higher, and the two lines you draw across them meet at a point not far to the right. Bulkowski sets a limit of three weeks for a pennant on daily bars, and if the pause lasts longer, he calls the shape a symmetrical triangle or a wedge instead.

Everything else in the bearish pennant pattern depends on the break. A close below the lower line counts. A wick through the line is only a test. Some readers search for a bearish pennant reversal, as if this shape could turn a rise into a fall. In the classic reading it cannot, because a pennant follows its pole.

What does happen is a failed pattern. In Bulkowski’s sample of stock charts from a rising market, 57% of pennants broke upward — so the close outside the lines decides, whatever the pole suggests. If the price closes on the wrong side of the pennant, the pattern has failed, and you need to let it go.

Pennant, flag or triangle

Why do traders mix these three shapes up? On a fast chart they look alike. The words people type into Google show it well — “bear flag pennant”, “bearish flag pennant”, “bear pennant flag”, as if all of it were one figure. They are related. The lines are what tell them apart.

In a pennant the two lines meet. In a bear flag they run parallel, and the whole channel tilts up, against the pole. A symmetrical triangle has no pole in front of it, it is bigger, and it takes longer to build. Robert Edwards and John Magee described flags and pennants back in 1948, in Technical Analysis of Stock Trends, and called both of them “half-mast” patterns — they tend to show up near the middle of a move.

One more detail from Bulkowski is worth keeping. Pennants that slope in the same direction as the pole tend to do worse than the others. For a bearish pennant this means a pause that keeps sliding down is weaker than a pause that holds level.

Gold in late October

A real chart is more useful than any drawing. The prices below are daily XAU/USD bars from Twelve Data, checked on 3 November 2026. Other feeds can differ by a few dollars, because each broker closes the day at its own server time.

On 21 October gold closed near $4,135, and over the next two days it fell to about $3,976 — a drop of roughly $160 in two sessions, with no real bounce on the way. On one lot of 100 ounces that is $16,000, and on 0.01 lot it is $160. Higher oil prices and bets on another Fed hike were behind the selling. This was a clear pole.

Then came four quieter sessions, and many traders would call that pause a bearish pennant. I looked at the highs and came to a different view. From 26 to 29 October the daily highs went up each day — about $4,030, $4,066, $4,071 and $4,082. The lows rose on three of those four days. Lines that rise together do not meet, so this was a bear flag.

The flag broke on 30 October. Reuters reported spot gold down 2.7% at $3,910 by 14:05 GMT, its lowest level since October 2025, and the daily low reached about $3,871. If you copy the $160 pole down from the $4,000 line, the target is about $3,840. The lowest price so far came on 2 November at about $3,866 — some $25 short — and gold closed that day near $3,944.

A target is a direction, not a promise.

Entry, stop and target

Now the plan for a pennant that really is a pennant. Below is the bearish pennant chart pattern on one-hour bars with example prices. Here the pole runs from 1.3060 down to 1.2940 — 120 pips. You sell on the first close below the lower line, at 1.2945.

The stop goes above the last high inside the pennant. Here that high is 1.2969, and a stop at 1.2980 leaves a buffer of 11 pips. The risk is 35 pips. On a pair quoted in dollars, such as GBP/USD, one pip on one standard lot is worth $10, so the risk is $350 on one lot and $3.50 on 0.01 lot. Our guide to pips shows the same sum for pairs where the dollar comes first.

The target copies the pole down from the entry. 1.2945 minus 120 pips gives 1.2825 — $1,200 on one lot and $12 on 0.01 lot, about 3.4 times the risk. The numbers look good. Are they realistic? I come back to this at the end.

For a bullish pennant pattern every line turns upside down. You buy the first close above the upper line, keep the stop below the last low inside the pennant and measure the pole upward. If you cannot find a real high or low inside the pennant for the stop, you need to skip the trade.

Volume without an exchange

Almost every pennant guide says the same thing about volume. It should fall inside the pennant and jump on the break. On stocks this makes sense, and Bulkowski found falling volume in 86% of the pennants he counted. Forex is different. Spot forex has no central exchange. The MetaTrader 5 help explains that on Forex the volume of a bar is the number of ticks — price changes — that happened in it.

For me tick volume is a weak clue. Ticks rise when London or New York opens, whatever the pattern on the chart. So a jump in “volume” at the break may only mean that a session has started. This is why I check the time of the break against the server clock before I look at the volume bars. If the break comes in the first minutes of a session, you need to look at it twice.

The pennant inside a robot

I write trading robots, and a robot cannot see a picture. Every word in this article has to become a number before an expert advisor can use it. How steep is steep? How many bars make a pause? Does a line touch the wick of a candle or its body?

If I coded a bear pennant pattern, the pole would need to be several times longer than an average bar, the pennant would need a maximum number of bars, and each swing would need to be smaller than the one before it. Each of those parameters moves the result of a backtest. This is why I trust a pennant less than a moving average.

Two traders can draw the same pennant in two different ways. The formula of an average stays the same for everyone. So if you trade pennants by hand, it helps to write your rules down as numbers — the way a robot needs them.

A pennant also needs a trend around it. Our free Smart Trend Trading System for MT5 shows the trend direction on the chart, and a falling exponential moving average does a similar job. Both answer one simple question — is this pause inside a fall or inside a rise?

Numbers against the textbook

Not everyone agrees that pennants work, and the strongest doubt comes from the man who counted them. In Bulkowski’s sample of more than 1,600 trades on stocks, only about one pennant in three reached its full target — 35% after upward breaks and 32% after downward ones. The move after the pennant was as long as the move before it just 30% of the time.

Many websites still promise 70–80% success for the bear pennant chart pattern. I could not find where that number comes from.

My answer to this doubt is practical. The pattern gives you a place for the stop and a reason to sell. The full copy of the pole is a bonus.

For me a first exit at half the pole makes more sense — in the example above that is 60 pips, $600 on one lot or $6 on 0.01 lot, while the rest of the position waits for the full 120. Will this hold on gold or on the yen? I do not know yet.

A steep pole, lines that meet, a close outside them, a stop above a real high, a modest first exit — together these turn bearish pennant trading into a plan. The sharper the pole and the tighter the pennant, the less you have to guess.