Flag and Pennant
A flag is a short-term continuation chart pattern consisting of a sharp directional price move (the flagpole) followed by a brief, relatively tight rectangular consolidation channel that slopes counter to the prior trend; a pennant is similar but features converging trendlines during the consolidation, forming a small symmetrical triangle atop the flagpole.
Flags and pennants are among the shorter-duration continuation patterns studied in technical analysis and are associated with fast-moving, momentum-driven market environments. Both patterns begin with a flagpole: a sharp, near-vertical price move on elevated volume that reflects a sudden influx of directional order flow. This move is followed by a period of relatively orderly consolidation in which the prior sharp move appears to digest before the trend resumes.
In a bull flag, the consolidation channel slopes downward at a modest angle, forming a rectangular band with parallel upper and lower trendlines. In a bear flag, the consolidation slopes upward. The pennant variant features converging trendlines during the consolidation period, creating a small triangle. Both patterns are expected — in the technical analysis framework — to resolve in the direction of the original flagpole move, with the breakout from the consolidation marking the continuation.
The measured move objective for flags and pennants is calculated by projecting the length of the flagpole from the breakout point of the consolidation. Historical examples analyzed in technical literature have shown that this projection provides a rough price target, though outcomes vary considerably based on market conditions, sector context, and the broader trend environment.
Volume characteristics are frequently discussed in the context of flags and pennants. The flagpole formation is historically associated with a surge in volume, followed by contracting volume during the consolidation phase, then a volume expansion accompanying the breakout. This volume signature has been described in the literature as consistent with temporary profit-taking or short-term position reduction after the initial surge, followed by renewed participation on the breakout. As always, historical pattern observations do not guarantee future outcomes, and false breakouts from flag and pennant formations are a documented occurrence.