A
technical charting pattern that looks like a flag with a
mast on either side. Flags result from price fluctuations
within a narrow range and mark a consolidation before the
previous move resumes.
Likewise, "pennant" formations
are usually treated like flag formations because they are
very similar in appearance, tend to show up at the same place
in an existing trend, and have the same volume and measuring
criteria.
Flags
and pennants are among the most reliable of continuation
patterns and only rarely produce a trend reversal.
The
only difference between the two patterns is that a flag resembles
a parallelogram (or rectangle) marked by two parallel trend
lines that tend to slope against the prevailing trend.
The
pennant, however, is identified by two converging trend lines
and more horizontal which resembles a small symmetrical triangle.
The
important thing to remember is that they are both characterized
by diminishing trade volume and though different, the measuring
implications are the same for both patterns as demonstrated
in the above illustration.
