Next up we’ve got the flags and pennants.

These are relatively common patterns that are typically grouped together because they look like one another, they tend to show up in roughly the same place in a trend and share the same volume and measuring criteria.

As continuation patterns, flags and pennants represent a pause in a dynamic market. In fact, for these patterns to appear they must be preceded by a sharp and almost straight line move on heavy volume.

This tends to happen when the market gets ahead of itself and experiences a very steep advance or decline. The flag or pennant formation appears as a sign that the market is taking a break before it continues with the trend.

Flags and pennants are considered some of the most reliable continuation patterns because they very rarely produce a trend reversal.
The two formations are quite similar, but they do have a few different features.

The flag is marked by a steep line (upward or downward) which acts as a flagpole, and two parallel trendlines that slope against the prevailing trend.

The pennant is also marked by a steep line that acts as a flagpole, but instead of two parallel trendlines, it is marked by two trendlines that are converging horizontally.

To help you understand what the chart looks like, it’s important to know that a pennant closely resembles a symmetrical triangle.

In terms of measuring implications, flags and pennants are said to fly at ‘half-mast’ from the flagpole. The name implies that the pattern typically appears near the halfway point of the move.
That’s it for flags and pennants!