Flag and Pennant Chart Patterns
Flag and Pennant Chart Patterns in Technical Analysis
A flag chart pattern is a technical analysis term referring to a chart pattern that gets created when a steep rise (or fall) is followed first by trading in a narrow price range and then finalized with a second steep rise (or fall). Some technical analysts believe that if a rise (or fall) precedes the "flag", then a rise (or fall) is likely to follow it.
A pennant chart pattern is a technical analysis term that refers to a chart pattern which occurs when the trading range formed by successive highs and lows narrows over time.
Short-Term Flag and Pennant Chart Patterns
Flag and pennant chart patterns are short-term continuation patterns that are formed when there is a sharp price movement followed by a sideways price movement. This pattern is then completed when another sharp price movement heads in the same direction as the move that initiated the trend. Flag and pennant chart patterns are usually short lived, lasting generally between one and three weeks.
There is little difference between a pennant and a flag. The main difference between these price movements can be seen in the middle section of the chart pattern. In a pennant, the middle section is characterized by converging trendlines, much like what is seen in a symmetrical triangle.
The middle section on the flag pattern, on the other hand, shows a channel pattern, with no convergence between the trendlines. In both cases, the trend is expected to continue when the price moves above the upper trendline.
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