Technical Analysis · Intermediate · 4 min
Triangles, flags, pennants
You can recognize ascending, descending and symmetrical triangles, flags and pennants, and explain what a breakout from each would need.
Coiling before a move
Before many large moves, prices pause. The swings get smaller, the candles quieter, as if the market were coiling. Then the price breaks out of the pause and runs.
Traders have given names to the shapes these pauses take. Some are long and drawn out, others last only a few candles. This lesson covers the most common ones and what they need before they mean anything.
Squeezed between lines
A triangle forms when the price swings between two converging lines, with each swing a little smaller than the last. There are three types:
- Ascending triangle: a flat upper line and rising lows. Buyers step in at higher prices each time, while sellers hold one level.
- Descending triangle: a flat lower line and falling highs. The mirror image.
- Symmetrical triangle: falling highs and rising lows. Neither side is gaining ground, and the shape alone does not say which way it will break.
In the fictional chart, rallies stop near 33.20 on candles 5, 6, 11, 17, 18 and 21. The lows rise from 31.35 to 31.80 to 32.19. On candle 22, the price closes at 34.00, above the flat top, and goes on to 35.
Triangles are often described as continuation patterns, meaning that the breakout tends to follow the trend before them. That is a tendency in the textbooks, not a rule. The direction is only known after the breakout, and the lesson on fakeouts applies here too: a close beyond the line is needed, and breakouts can still fail.
The classic target for a triangle is its height at the widest point, projected from the breakout. Like all measured targets, it is a rough guide.
Pole, flag, breakout
Flags and pennants are shorter pauses after a sharp move. The sharp move is called the pole.
- A flag is a small, roughly parallel channel, often sloping slightly against the pole.
- A pennant is a small, converging triangle.
In the fictional chart, the price rises from 20 to 24.17 in seven candles: the pole. For the next seven candles, it drifts slightly lower in a narrow channel between about 23.06 and 24.11. On candle 16, it breaks out to 24.40 and reaches 26 four candles later.
The pole is part of what makes a flag a flag. Without a strong move before it, a small channel is just a pause. A stop below the flag's low, here 23.06, marks where the idea of a continuation would be proven wrong.
Common mistakes
- Acting before the breakout. Until the close beyond a line, the pattern is only a pause.
- Drawing lines to fit. Use clear swing points, as in the trendline lesson.
- Assuming the direction of a symmetrical triangle. It can break either way.
- Calling every pause a flag. Without a sharp pole, there is no flag.
The takeaway
Triangles squeeze the price between converging lines. Flags and pennants are short pauses after a sharp move. All of them still need a breakout.
Check yourself
Quick quiz
4 questions. Instant feedback, nothing is saved.
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1Tap the flat upper line of the ascending triangle.
Tap the chart.
Rallies stopped near 33.20 again and again, while the lows kept rising. That flat top with rising lows defines an ascending triangle.
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2What is the difference between a flag and a pennant?
Both are short pauses after a strong move, often called the pole. Their shape differs.
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3In which direction does a symmetrical triangle break?
Converging highs and lows show indecision. Many traders lean toward the prior trend, but the breakout decides.
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4What do these patterns still need before most traders act on them?
Without a breakout, a triangle or flag is just a pause. Breakouts can also fail, as the lesson on fakeouts showed.
of 4 correct.
Sources
- Edwards & Magee: Technical Analysis of Stock Trends (1948, book)
- Lo, Mamaysky & Wang: Foundations of technical analysis, Journal of Finance 55(4) (2000)