The Flag & the Pennant are two continuation patterns that are seen most of the times in the midpoint of a strong trending move. The Flag is a countertrend pattern, where the entire corrective phase is contained in a small rectangle with the lines slanted slightly down. The Pennant is a very similar pattern but the shape of the corrective phase is triangular in this case. It must be noted that for both the patterns to be valid, those must be preceded by very sharp moves in favour of the major trend acting as poles. Without the pole, there can’t be a Flag or Pennant.
Most Used Trends of Flags & Pennats Pattern
Advantages & Limitations Of Flags and Pennats Pattern
The biggest advantage of the patterns is the already anticipated direction. Both the patterns are visible at the midpoint of the trending move and that gives the trader an invaluable knowledge of a probable end point of the major trend. The height of the pole is projected from the breakout point to ascertain the target. The performance of the Flag increases dramatically if the range is tight instead of just a loose formation. The same condition is applicable to Pennant too as the absence of gap implies more tight contraction of volatility too.