The flag formation movement is often nearly vertical, and at the very least is extremely steep. The move is so rapid, in fact, that on a daily chart a trendline can't even be drawn. Typically, the move occurs on very strong volume and lasts a few trading days. Gaps will often be present within this part of the move. The Flag pattern usually occurs after a significant up or down market move. After a strong move, prices usually need to rest. This resting period usually occurs in the shape of a rectangle, thus the word "flag". The Flag is considered a continuation pattern because after resting, prices will usually continue in the direction they did before. The chart of eBay (EBAY) shows many Flag patterns:

A flag chart pattern is formed when the market consolidates in a narrow range after a sharp move. Flags can be seen in any time frame but normally consist of about 5 to 15 price bars—although that is not a set rule. Flags are excellent chart pattern trading candidates. A “flag” is composed of an explosive strong price move that forms the flagpole, followed by an orderly and diagonally symmetrical pullback, which forms the flag. When the trendline resistance on the flag breaks, it triggers the next leg of the trend move and the stock proceeds ahead. This downward sloping channel is a flag formation. Traders refer to the price action within the channel as a consolidation. Typically, up-trending price activity will have a downward sloping flag and down trending price activity will have an upward sloping flag. "bull" flag in an uptrend (bullish) After a sharp rally, this "bull" flag served as a breather before running off again in the same direction. You can see the volume ease up a bit in the beginning of the flag, but then pick up as it nears the top of the formation and blows through it.

High and Tight Flag: Example The above figure shows an example of a high and tight flag chart pattern. Price begins the rise in October at 9.36 and rises to 17.80, a climb of 90% in less than 2 months. Then price moves sideways, forming an ascending triangle.

Updated Jan 5, 2009. Bullish flag formations are found in stocks with strong uptrends. They are called bull flags because the pattern resembles a flag on a pole. The pole is the result of a vertical rise in a stock and the flag results from a period of consolidation. You can see the volume ease up a bit in the beginning of the flag, but then pick up as it nears the top of the formation and blows through it. "BULL" FLAG IN AN UPTREND (BULLISH) "Bull" flag in an uptrend. Quick rally, short pause, blast higher. Volume dips in the flag and surges on the breakout. A flag can be used as an entry pattern for the continuation of an established trend. The formation usually occurs after a strong trending move that can contain gaps (this move is known as the mast or pole of the flag) where the flag represents a relatively short period of indecision. 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). The flag formation movement is often nearly vertical, and at the very least is extremely steep. The move is so rapid, in fact, that on a daily chart a trendline can't even be drawn. Typically, the move occurs on very strong volume and lasts a few trading days. Gaps will often be present within this part of the move. The Flag pattern usually occurs after a significant up or down market move. After a strong move, prices usually need to rest. This resting period usually occurs in the shape of a rectangle, thus the word "flag". The Flag is considered a continuation pattern because after resting, prices will usually continue in the direction they did before. The chart of eBay (EBAY) shows many Flag patterns: The first component of the Flag chart pattern is the Flag Pole. It represents a trend impulse on the chart. Every trending move could transition into a Flag, which brings us to the statement that every trend impulse could appear to be a flag pole.

How to identify a Bullish Flag on Forex Charts. It can be complex identifying a bull flag on a chart because the pattern entails several different components.

A flag can be used as an entry pattern for the continuation of an established trend. The formation usually occurs after a strong trending move that can contain gaps (this move is known as the mast or pole of the flag) where the flag represents a relatively short period of indecision. 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). The flag formation movement is often nearly vertical, and at the very least is extremely steep. The move is so rapid, in fact, that on a daily chart a trendline can't even be drawn. Typically, the move occurs on very strong volume and lasts a few trading days. Gaps will often be present within this part of the move. The Flag pattern usually occurs after a significant up or down market move. After a strong move, prices usually need to rest. This resting period usually occurs in the shape of a rectangle, thus the word "flag". The Flag is considered a continuation pattern because after resting, prices will usually continue in the direction they did before. The chart of eBay (EBAY) shows many Flag patterns:

A flag can be used as an entry pattern for the continuation of an established trend. The formation usually occurs after a strong trending move that can contain gaps (this move is known as the mast or pole of the flag) where the flag represents a relatively short period of indecision.

The flag formation movement is often nearly vertical, and at the very least is extremely steep. The move is so rapid, in fact, that on a daily chart a trendline can't even be drawn. Typically, the move occurs on very strong volume and lasts a few trading days. Gaps will often be present within this part of the move. The Flag pattern usually occurs after a significant up or down market move. After a strong move, prices usually need to rest. This resting period usually occurs in the shape of a rectangle, thus the word "flag". The Flag is considered a continuation pattern because after resting, prices will usually continue in the direction they did before. The chart of eBay (EBAY) shows many Flag patterns: The first component of the Flag chart pattern is the Flag Pole. It represents a trend impulse on the chart. Every trending move could transition into a Flag, which brings us to the statement that every trend impulse could appear to be a flag pole. Trading flags and pennants isn't anything new to most traders. However, if you are able to identify another perspective on the formation, you essentially can develop an edge over other market participants. To quickly recap, in this article we covered three strategies for trading flags and pennants: Duration: Flags and pennants are short-term patterns that can last from 1 to 12 weeks. Ideally, these patterns will form between 1 and 4 weeks. Once a flag becomes more than 12 weeks old, it would be classified as a rectangle. A pennant more than 12 weeks old would turn into a symmetrical triangle.

How to identify a Bullish Flag on Forex Charts. It can be complex identifying a bull flag on a chart because the pattern entails several different components.

Flagpole: The flagpole is the distance from the first resistance or support break to the high or low of the flag/pennant. The sharp advance (or decline) that forms the flagpole should break a trend line or resistance/support level. A line extending up from this break to the high of the flag/pennant forms the flagpole. A flag chart pattern is formed when the market consolidates in a narrow range after a sharp move. Flags can be seen in any time frame but normally consist of about 5 to 15 price bars—although that is not a set rule. Flags are excellent chart pattern trading candidates.

A flag can be used as an entry pattern for the continuation of an established trend. The formation usually occurs after a strong trending move that can contain gaps (this move is known as the mast or pole of the flag) where the flag represents a relatively short period of indecision. The pattern usually forms at the midpoint 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. The flag or pennant chart pattern is formed right after a bullish or bearish price movement followed by a period of consolidation. This is where price tends to take a pause before continuing in the original direction of the trend. Once you can see the larger formation, look to buy the open of the stock once it gaps through the previous day's flag or pennant. Strategy #3 - Use Ichimoku to Validate the Breakout Because flags and pennants are such common patterns, you need to have a method for weeding out the noise.