Flags and Pennants

Short-term continuation patterns that appear after a sharp move (called the "flagpole").

• Flag — a consolidation sloping against the trend inside a small channel.
• Pennant — a consolidation shaped like a small triangle.

Execution

• Trigger: price breaks a side of the flag/pennant in the direction of the previous trend.
• Stop: on the opposite side of the pattern.
• Target: the length of the "pole" projected from the breakout point.

Notes

A healthy flag usually forms quickly and does not correct too deeply. A consolidation that lasts too long or widens too much weakens the pattern.

Key points

• Flag/pennant = a pause, not a reversal. Trade in the direction of the trend.
• A clear "pole" is needed for the target to be meaningful.