Last week I shared with you the ‘Ascending Triangle’ pattern. This week I will be covering Flags and Pennants.

Flags and Pennant Patterns

Flags and Pennants are among the most reliable of continuation patterns.

Click here for an example of a Flag chart pattern

The only difference between the two patterns is that the Flag represents a rectangle marked by two parallel lines. These lines slope against the prevailing trend. The pattern looks like a flag with a mast on either side. Flag patterns result from price fluctuations within a narrow range and mark a consolidation before the previous trend resumes.

The Pennant, however, is identified by two converging trend lines.

Click here for an example of a Pennant chart pattern

Pennant formations are treated like Flag patterns because they are very similar in appearance. They tend to show up in an existing trend, and have the same volume and measuring criteria as Flag patterns.

How to trade Flags and Pennants:

1. Note the height of the flag-pole leading up to the formation.
2. Wait for a break out of the pattern on the opposite side (as a continuation of the original trend).
3. The distance that the share price will move in continuation of the trend, will be similar to the size of the flag-pole entering the pattern.

More on Chart Patterns next week.

Until then…

Jules Dawson

Jule Corporation Pty Ltd
PO Box 1241 Mullumbimby NSW 2482
Telephone: 1300 557 881
Email: info@julecorp.com
Web: www.julecorp.com