Measuring Implications of
Flags and Pennants
Measuring Implications
of Flags and Pennants
The
measuring implications are similar for both patterns.
Flags and pennants are said to "fly at half-mast" from a
flagpole. The flagpole is the prior sharp advance or
decline. The term "half-mast" suggests that these minor
continuation patterns tend
to
appear at
about the halfway point of the move. In general, the
move after the trend has resumed will duplicate the
flagpole or the move just prior to the formation of the
pattern.
To
be more precise, measure the distance of the
preceding move from the original breakout point.
That is to say, the point at which the original
trend signal was given, either by the penetration of
a support or resistance level or an important trend
line. That vertical distance of the preceding move
is then measured from the breakout point of the flag
or pennant-that is, the point at which the upper
line is broken in an uptrend or the lower line in a
downtrend.
Summary
Let's
summarize the more important points of both patterns.
-
They are both preceded
by an almost straight line move (called a flagpole)
on heavy volume.
-
Prices then pause for
about one to three weeks on very light volume.
-
The trend resumes on a
burst of trading activity.
-
Both patterns occur at
about the midpoint of the market move.
-
The pennant resembles
a small horizontal symmetrical triangle.
-
The flag resembles a
small parallelogram that slopes against the
prevailing trend.
-
Both patterns take
less time to develop in down trends.
-
Both patterns are very
common in the financial markets.
Measuring Implications of Flag and Pennants