Flags and Pennants

These two short-term chart patterns are continuation patterns that are formed when there is a sharp price movement followed by a generally sideways price movement.

This pattern is then completed upon another sharp price movement in the same direction as the move that started the trend. The patterns are generally thought to last from one to three weeks

As you can see in Figure, 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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