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.
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