Pennants and Rectangles
Two continuation shapes that differ only in whether the pause is converging or flat. Both describe a period in which nothing was decided.
MadStockAlerts Research · Updated August 28, 2026
What to take away
- A pennant is a short converging pause after a sharp move.
- A rectangle is a flat range between two horizontal levels.
- The rectangle is the more useful of the two, because its boundaries are visible to everyone.
- A pennant is a small wedge and inherits the drawing problems.
- Both are named continuations and both resolve in either direction regularly.
MAD Academy Training Video · 0:45
Two Ways to Take a Breath
A pennant coils and a rectangle holds level. Both are pauses; the difference is whether the range is shrinking.
This lesson is part of a Stock Alerts + Tools plan.
The two shapes
| Pennant | Rectangle | |
|---|---|---|
| Boundaries | Two converging drawn lines | Two horizontal levels |
| Duration | Short, typically days | Anything from days to months |
| Preceded by | A sharp move, the pole | Not necessarily anything |
| Objectivity | Low. Both lines are drawn | High. The levels are prices anyone can read |
The last row is the substantive difference and the reason a rectangle is worth more. A horizontal level is a price at which trading actually occurred repeatedly; a converging line is a construction placed over a set of bars.
What a rectangle describes
A flat range between two levels is a period of agreement: buyers appear reliably at one price and sellers at another, and neither side has been able to move the boundary.
Scroll the chart sideways to see all of it.
That is the same mechanism described under support and resistance, applied to two levels at once, and it is why a rectangle's boundaries behave like any other level: they are references for the participants who transacted at them.
The pennant caveat
A pennant is a wedge over a short window, and a short window is where a converging pair of lines can be fitted to almost anything. Over five or six bars, a drawn convergence is close to unfalsifiable.
The honest version of a pennant is the flag description without the drawing: a brief pause on declining volume after a sharp move. That statement can be checked; the geometry adds nothing to it.
The continuation label
Both shapes are conventionally described as continuation patterns, which means they are expected to resolve in the direction of the move that preceded them. The label is applied after the fact often enough to be worth treating carefully.
A rectangle that resolves downward is not a failed rectangle; it is a rectangle that resolved downward. The shape describes a range, and a range has two exits.
What a range is for
A rectangle's practical value has little to do with predicting the resolution and a great deal to do with what it provides while it lasts: two defined prices at which a reading would be wrong.
- A break above the ceiling is a specific, observable event with a date, not an interpretation.
- A close back inside the range is an equally specific failure condition.
- The distance between the boundaries defines the risk on any position taken at the break.
- Both prices are visible to every other participant, which is what makes them references.
That set of properties is what the failed patterns article means by defining failure in advance. A structure with two horizontal boundaries supplies the definition without anyone having to construct one.
It also explains why a rectangle survives a change of timeframe better than most named shapes. The boundaries are prices, and prices do not change when the aggregation does, unlike every bar-shape pattern in this pillar.