2. Pennant Breakout

Entry Logic

Trigger: Price closes above the upper trendline of the pennant on a 5-minute chart. Confirmation: Volume surge on the breakout candle. Timeframe: 5-minute chart. Location context: Price forms a small, tight consolidation after a sharp move. Market condition: Strong trending market.

Exit Logic

Profit targets: Measure the preceding flagpole height, project from breakout. Scaling out: Scale out 50% at the first target. Trailing stop: 0.75 ATR below the 5-minute candle low. Signal failure: Price re-enters the pennant and closes. Time expiration: Close trade after 90 minutes if target not hit. Momentum loss: Close if price fails to advance for 25 minutes.

Stop Loss Structure

Hard stop: 0.4% below the breakout candle low. Soft stop: Price closes back inside the pennant. Max dollar loss: $180 per trade. Max percent loss: 0.45% of account. Structural stop: Below the lowest point of the pennant's base.

Risk Management Framework

Risk per trade: 0.8% of account. Daily limit: 2.5% maximum drawdown. Weekly limit: 4% maximum drawdown. Max drawdown: 8% before review. R:R requirement: Minimum 2.5:1.

Position Sizing Model

Sizing approach: Fixed dollar risk per trade. Volatility adjustment: Reduce size by 15% for instruments with ATR > 1.2%. Conviction sizing: Add 5% size for A+ setups with double confirmation. Scaling in/out: Enter 100% on initial breakout, no scaling in.

Trade Filtering

Market conditions: Only trade in clear, established trends. Setups: Clear pennant formation, symmetrical in nature. Instruments: High-volume stocks, futures contracts. Time restrictions: Avoid the first 20 minutes of market open. Chop/news avoidance: Do not trade during FOMC announcements.

Context Framework

Trend direction: Aligned with 15-minute and 60-minute trends. VWAP relationship: Price must hold above VWAP for bullish pennant. MA relationship: Price above 9 EMA and 20 EMA for long. Range location: Breakout should occur from the direction of the prior move. Higher TF: Daily chart shows strong momentum.

Trade Management Rules

Breakeven: Move stop to breakeven once 1.5R profit is achieved. Scale out: Use two profit targets. Add size: Never add size to a losing trade. Fast vs slow moves: Tighten trailing stop for rapid price action.

Time Rules

Optimal window: 10:00 AM - 12:00 PM EST, 1:30 PM - 3:00 PM EST. Times to avoid: Pre-market, after-hours. Session notes: Focus on core trading hours.

Setup Classification

A+ criteria: High volume breakout, perfect pennant shape, strong higher timeframe trend. A criteria: Good volume, clear pennant, aligned trend. B criteria: Moderate volume, slightly distorted pennant. C criteria: Low volume, poor pennant structure.

Market Selection Criteria

Instruments: ES futures, NQ futures, GOOGL, AMZN. Volume: Average daily volume > 20 million shares for stocks. Volatility: ATR between 0.8% and 2% of price.

Statistical Edge Metrics

Win rate: 58%. Avg win: 2.2R. Avg loss: 0.7R. Profit factor: 1.8. Expectancy: $1.40 per dollar risked.

Failure Conditions

Strategy fails if: Market experiences sudden reversals. Pennant is too wide or too narrow. Breakout lacks conviction.

Psychological Rules

Mental discipline: Be patient for the perfect setup. Do not chase trades. Maintain focus.

Advanced Components

Regime detection: Use MACD for momentum confirmation. Filters: Use Keltner Channels to identify tight consolidations. Correlation: Monitor VIX for market volatility context. MTF alignment: Confirm pennant forms within a broader trend on 15-minute chart.

Location

Strongest: After a significant impulse move. Weakest: At the top or bottom of a prolonged range.