Flags and pennants

Prerequisite: A repeatable multi-timeframe process

On a small screen, scroll the figure sideways or open it full size.

Learning objective

Distinguish a consolidation after an impulse from an arbitrary small range.

A flag is a short channel-like pause after a directional move, often sloping against that move. A pennant has converging boundaries after a similar impulse. The preceding impulse, sometimes called a pole, is part of the definition: without it, a small channel or triangle need not be a continuation candidate.

Specify maximum pause duration and depth relative to the pole. A deep, prolonged retracement may be better described as a range or a reversal attempt. The familiar continuation interpretation is a hypothesis; a break opposite the impulse remains possible and should be included in a systematic study.

Pole-length projection creates an illustrative reference after a defined break, not a guaranteed target. A sharp impulse can arise from news with wide spreads and poor execution. Before using any continuation rule, measure the risk distance from the planned entry and consider whether the relevant market is still orderly.

Common mistakes

Do not select the pole start retrospectively to enlarge a target or call every countertrend channel a flag regardless of its duration.

Practice

Draw a bearish pole from 110 to 100 followed by a shallow upward flag. Define its boundaries, deadline, break rule and a failure above the flag high.

Sources & further reading

• CMC Markets — Chart patterns explained