Flag & Pennant Pattern
Quick Definition
Continuation chart patterns that form during brief consolidation periods within a strong trend, resembling a flag on a pole.
Key Takeaways
- Flags slope against the trend; pennants are small symmetrical triangles — both signal trend continuation.
- The measured move target equals the flagpole length projected from the breakout point.
- Volume should contract during formation and expand on breakout for confirmation.
What Is Flag & Pennant Pattern?
Flag and pennant patterns are short-term continuation patterns that mark a temporary pause in a strongly trending market before the trend resumes. Both patterns consist of two parts: the "flagpole" (the sharp initial move) and the "flag" or "pennant" (the consolidation). A flag is a small rectangle that slopes against the prevailing trend, while a pennant is a small symmetrical triangle. These patterns typically form over 1–3 weeks and resolve with a breakout in the direction of the prior trend. The measured move target equals the length of the flagpole projected from the breakout point. Volume typically diminishes during pattern formation and surges on the breakout, confirming the continuation. Flags and pennants are considered among the most reliable continuation patterns, with success rates above 65% in strong trending markets.
Flag & Pennant Pattern Example
- 1After a 15% rally in two days (the flagpole), the stock consolidated in a tight downward-sloping channel for a week (the flag) before breaking out to new highs on heavy volume.
- 2A pennant formed as the price compressed into a symmetrical triangle after a sharp drop — the breakdown below the lower trendline continued the bearish move with a target equal to the flagpole length.
Related Terms
Triangle Pattern
A chart pattern formed by converging trendlines connecting a series of highs and lows, indicating consolidation before a breakout.
Consolidation
A period where a security's price trades within a defined range after a significant move, as the market digests gains or losses before the next directional move.
Breakout
A price movement where a security moves above a resistance level or below a support level on increased volume, often signaling the start of a new trend.
Trend Line
A diagonal line drawn across price highs or lows to identify the prevailing trend direction and potential support/resistance.
Moving Average
A calculation that averages a security's price over a specific number of periods, smoothing price data to identify trends.
Relative Strength Index (RSI)
A momentum indicator measuring the speed and magnitude of price changes on a 0-100 scale, used to identify overbought or oversold conditions.
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