Flag and Pennant Pattern
Short-term consolidation patterns that typically form after a sharp price move, generally interpreted as a brief pause before the prior trend resumes in the same direction.
A flag pattern forms after a sharp, strong price move (the "flagpole"), followed by a brief period of consolidation within a small, roughly parallel channel sloping slightly against the prior trend. A pennant is similar but forms a small, symmetrical triangle (see Kaavon's "Triangle Pattern" glossary definition) during the consolidation phase instead of a parallel channel. Both patterns are generally treated as continuation patterns, suggesting the prior sharp move is likely to resume in the same direction once the brief consolidation resolves.
Flags and pennants are typically short-duration patterns, forming and resolving over a relatively brief period compared to patterns like a triangle or a head and shoulders formation, reflecting a quick pause for profit-taking or consolidation rather than a genuine shift in the underlying trend. As with other continuation patterns, a breakout in the direction of the original trend is generally treated as confirmation that the pattern has resolved as expected.
Examples
- A bull flag forming after a sharp rally, followed by a brief consolidation sloping slightly downward, is generally interpreted as a pause before the rally resumes rather than a reversal.
- Flags and pennants typically resolve over a much shorter timeframe than larger patterns like a triangle or head and shoulders formation.