What Is a Worked Example of Pennants?

Direct answer

A worked example of pennants is a numerical scenario that shows how you identify a pennant’s basic structure and how you can calculate a “measured move” distance using assumed price levels. The goal is to explain the mechanics clearly and to state every assumption, not to predict outcomes.

Mechanics: definition and inputs

A pennant is commonly described as a short period of consolidation shaped like a small converging wedge (two trendlines that slope toward each other) that occurs after a prior directional move. The key idea is “structure after expansion”: first a larger move, then a narrowing range, then a possible continuation.

For a worked example, you need to define the objects you will measure:

• Prior move (expansion): the distance between an assumed prior swing low and swing high (or vice versa, depending on direction).
• Pennant range: the swing high and swing low during the converging consolidation.
• Measured-move rule (example method): a common educational approach is to take the prior move size and apply it as a distance from a reference level (such as the pennant’s breakout level).

Important: there is no single universal calculation method. Different charting communities use different reference points and breakout rules, so your worked example must specify which choices you made.

Worked numerical example with stated assumptions

Below is one transparent scenario with explicit assumptions. It uses no real-time data.

Assumptions

1. We are working on a price chart where you can draw trendlines through two sets of points.
2. The prior expansion move goes upward.
3. The prior swing low is at 100.00.
4. The prior swing high is at 108.00.
5. The pennant consolidation forms between 107.20 (upper boundary during consolidation) and 106.60 (lower boundary during consolidation).
6. The breakout reference level you choose is the pennant upper boundary at 107.20, and you assume a continuation occurs “after” that level is crossed.
7. Measured-move rule used for this example: Target distance = prior move size, and the example target = breakout reference level + prior move size.

Step-by-step calculation

1. Prior move size = 108.00 − 100.00 = 8.00.
2. Breakout reference level = 107.20 (chosen assumption).
3. Example measured-move target = 107.20 + 8.00 = 115.20.

This gives a single numeric distance (8.00) applied to a chosen reference level (107.20) to produce a hypothetical target (115.20). The calculation is straightforward; the uncertainty is whether the market actually behaves in a way that matches the pennant structure.

How you can verify the “pennant” part independently

To verify, you can apply the same structural checks on historical charts:

• There is a prior directional move.
• Consolidation shows a converging shape (upper boundary trends down or remains constrained while lower boundary trends up).
• The consolidation is relatively shorter than the prior move (you define “shorter” visually or by timeframe comparison).

If the structure does not converge, or if the “expansion then narrowing” relationship is missing, the label pennant may not be consistent with your rules.

Limitations and failure modes

A pennant description can fail in several ways, and your worked example cannot remove that uncertainty.

• Ambiguous boundaries: Different people draw different trendlines and choose different reference points (which changes measured distances).
• False breaks: Price can cross a chosen breakout level briefly and then reverse.
• Costs and execution effects: Even if structure appears similar, real outcomes depend on spread/fees, order execution, and liquidity conditions, which are not modeled in the simple arithmetic above.
• Market regime changes: Historical patterns do not guarantee future behavior; relationships can weaken when volatility and participation change.

Verification or next question

If you want to independently verify the example method, try applying the same assumptions to a historical section on your own charting platform:

1. Mark the prior swing low/high.
2. Mark the pennant consolidation boundaries.
3. Use your chosen measured-move rule to compute a hypothetical target distance.
4. Compare what actually happened afterward.

A next question you can ask is: What exact breakout level and measured-move reference do you use, and how sensitive are your results to changing that one choice?