What Are Flag and Pennant Chart Patterns
Flag and Pennant patterns are frequently observed on price charts of various financial instruments
such as stocks, bonds, and futures. These patterns are defined by a clear trend direction followed by
a period of consolidation and range-bound movement, signalling a continuation of the trend.
Flag Pattern
The flag pattern consists of two parallel lines, which can either be horizontal or sloping in the opposite
direction of the primary market trend. The “pole” is formed by a line that represents the initial trend
in the market. This pattern suggests that the market is taking a temporary pause or consolidation
phase after a significant move before potentially continuing its primary trend.
Pennant Pattern
The pennant pattern closely resembles the flag pattern in structure and implications, with the key
difference being that the consolidation phase is characterized by converging trendlines rather than
parallel ones. This pattern also indicates a brief pause in the market trend, followed by a likely
continuation of the primary trend.
