Pennant | AlgoLift Guide

TL;DR. A pennant is a sharp move, the pole, followed by a short pause whose highs come down and whose lows come up, then a close through the pause in the pole's direction. It is a flag whose range has to narrow. The Pennant node finds bull and bear pennants, fires once on the breakout bar, and hands you the breakout level, a measured-move target and a stop. One Sensitivity setting decides how strict the shape must be.

What it measures

A continuation that coils. After a strong push, price pauses and the swings get smaller. A close through the narrowed pause says the push is resuming.
Both directions in one node. A bull pennant breaks up; a bear pennant is the same shape upside down and breaks down. The node's breakout reads +1 for a bull pennant and -1 for a bear pennant.
Once per pennant. The breakout fires on one bar and the pattern ends. Another breakout needs a new pole.

Formula

How AlgoLift computes it

The pole. The same rule as the Flag node: a bar whose high is the highest of the last Pole within bars, and which has risen at least Pole at least times the 14-bar ATR from the lowest low of those bars. While no pennant bar has formed, each new higher bar extends the pole.

The pennant. The bars after the pole's top. It lasts while it gives back no more than Gives back at most percent of the pole, its whole range stays within Pennant at most ATRs, and it is no longer than Longest pennant bars. Breaking any of these ends the pattern with no signal. A new pole also ends it.

Narrowing. Split the pennant's bars into an earlier half and a later half (the later half is the last half, rounded down). The pennant converges when the later half's high is no higher than the earlier half's, its low is no lower, and its range is at most Later half at most percent of the earlier half's range. A pennant that does not converge yet keeps forming but cannot break out.

The breakout. Once the pennant has Pennant at least bars and converges, a close above the later half's high (of the bars before the breakout bar) by at least Breaks by ATRs fires the signal. The target is that high plus the pole's height times Target %; the stop is the later half's low.

A bear pennant is the same rule with the chart turned upside down. Every test reads only the bar it is on and the bars before it, so nothing repaints. The ATR is the same one the ATR node shows. The chart, the Indicator Library and the backtest engine compute the same values, held together by a shared test.

Inputs in AlgoLift

Setting	Default	Range	Notes
Sensitivity	5	1 to 10	How strict the shape is. 1 finds only the cleanest pennants, 10 the loosest; 5 is the textbook shape. Every setting below moves with it.
Longest pennant	20	3 to 200 bars	The most bars the pause may last.
Target (% of height)	100	10 to 500	The target's distance past the breakout, in percent of the pole. 100 is the classic measured move.
Settings	From Sensitivity	From Sensitivity, Custom	Custom unlocks the seven settings below and reads them as you set them.
Pole at least	1.8 ATR	0.1 to 20	The pole's least height. Step 1: 3.0, step 10: 1.0.
Pole within	8 bars	1 to 200	The most bars the pole may take. Step 1: 5, step 10: 14.
Gives back at most	50%	1 to 100	The deepest the pennant may retrace. Step 1: 30%, step 10: 68%.
Pennant at most	1.6 ATR wide	0.1 to 20	The pennant's widest range. Step 1: 1.0, step 10: 2.6.
Later half at most	75% of the earlier	1 to 100	How much the pennant must narrow. Step 1: 55%, step 10: 95%.
Pennant at least	4 bars	2 to 200	The fewest pennant bars before a break counts. Step 1: 6, step 10: 3.
Breaks by	0.05 ATR	0 to 5	How far past the pennant a close must be. Step 1: 0.15, steps 7 to 10: 0.

Outputs in AlgoLift

Handle	Type	Plotted	Notes
Breakout	Numeric	Always	+1 on a bull pennant's breakout bar, -1 on a bear pennant's, 0 elsewhere. Wire it into a Comparison (greater than 0 for longs, less than 0 for shorts).
Bull pennant breakout, Bear pennant breakout	Numeric	On select	1 on that side's breakout bar, else 0.
Stage	Numeric	On select	The pennant forming now: 0 none, 1 forming, 2 armed (narrowed, and a close beyond the level would break out). Positive for a bull pennant, negative for a bear pennant.
Breakout level	Numeric	Always	The armed pennant's later half's high (or low, for a bear pennant).
Pattern high, Pattern low	Numeric	On select	The forming pennant's whole range.
Target, Stop	Numeric	On select	The last breakout's measured move and its later half's far side, held until the next breakout.
Bars forming	Numeric	On select	Bars since the pole's top.

How to read it

Stage 2: a pennant has narrowed and its level is drawn. A close beyond it is the signal.
Stage 1: a pole has formed and the pause has started, but it is too short or has not narrowed yet.
A level that comes and goes: the pause narrowed, then widened again. It arms again if it narrows before it ends.
Few signals: raise Sensitivity one step at a time and watch the count. Pennants are rarer than flags, because every pennant is also a flag that narrowed.

Common Misconception

Myth

A pennant is a stronger signal than a flag because it is a stricter shape.

Reality

It is a different filter, not a better one. The narrowing rule removes many pauses, and what is left needs its own test. Compare the two nodes on the same months before you pick one.

Best in, worst in

Best in trending sessions with impulsive legs, where the pause after a push contracts before the next leg.

Worst in slow, ranging markets: the pole rule finds few real impulses, and a loose Sensitivity starts calling ordinary wiggles pennants. Pair it with a trend filter.

Three setups

1. Pennant with a trend filter

Wire Breakout into a Comparison (greater than 0) and AND it with an EMA trend filter (EMA 20 above EMA 50) into a long Entry. Mirror it with less than 0 and EMA 20 below EMA 50 for shorts.

2. Measured-move exits

Set a Bracket Order with its target at the node's Target and its stop at the node's Stop, so every trade's exits come from its own pennant.

3. Trend strength confirmation

Require the ADX/DMI above 20 at the breakout, so pennants in a directionless market are skipped.

Common mistakes

Building the pennant by hand. A pennant needs memory (a pole, then a narrowing pause, then a break). The node holds that memory and has been tested against an independent implementation.
Loosening several rules at once. Move Sensitivity one step, not seven separate settings. If you need one rule different, switch Settings to Custom and change only that one.
Choosing Sensitivity on the backtest you report. Pick it on one window and check it on another (overfitting in trading).

Key Takeaway

The Pennant node finds a pole, a pause that narrows and the close through it, in both directions, once per pennant. Sensitivity sets how strict the whole shape is with one number.

Next: breakout strategies

#What it measures

#Formula

#Inputs in AlgoLift

#Outputs in AlgoLift

#How to read it

#Best in, worst in

#Three setups

#1. Pennant with a trend filter

#2. Measured-move exits

#3. Trend strength confirmation

#Common mistakes