What Flags and Pennants are Essential

Trying to figure out why traders are selling or buying can be tough.

But once you begin to understand charting, you’re literally looking at a consolidated view of the very forces of supply and demand – the two key forces that drive stocks. 

Understand that, and you’re one step ahead of the herd.

We’re already discussed some of the most powerful and most used patterns, but there are – quite literally – more than a hundred or so more. Two of the most important ones to add to your arsenal are pennants and flags. They’re continuation patterns.  

The Bull and Bear Flag Formations

A flag pattern can show up in the middle of a trend and often give you another opportunity to buy. Typically, a flag will show up when the price of a stock moves up (bull) or down (bear) in a strong trend, but then pauses.

The price of the stock will then trade sideways in a narrow, sometimes sloping range. Drawn trend lines will represent support and resistance, as the stock is narrowing will form a rectangular shape – much with the look of a flag. It’ll typically take the shape of a rectangle made up of two parallel trend lines that will act and resistance.

Eventually, the price will break out of the flag pattern and continue the original paused trend. 

As with most patterns, there is a bullish and bearish version. With a bullish flag, you’ll find the pattern resembles a flag on a pole. The pole is the result of a vertical jump in a stock followed by a brief period of consolidation. We can see this in late July 2017 on a chart of Facebook.com (FB) for example.


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With a bearish flag, you’ll find that the pattern is the upside-down version of a bullish flag.

The Pennant Formation

The pennant formation will take the shape of a symmetrical triangle, where support and resistance lines begin to converge upon one another.  It’s typically a continuation pattern much like the flag formation that follows a large movement in a stock, followed by a brief period of consolidation, creating the pennant look, followed by a breakout movement in the same direction as the previous move.


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