Flag Pattern

A Flag Pattern is a stock chart formation that looks like a flag with a mast. The Flag Pattern occurs after the stock or market index has a large run-up in price.  The flag is a period of consolidation before the stock price resumes its uptrend.

Flag Pattern

A Flag Pattern is a stock chart formation that looks like a flag with a mast. The Flag Pattern occurs after the stock or market index has a large run-up in price.  The flag is a period of consolidation before the stock price resumes its uptrend.  The Flag Pattern is very similar to the "pennant" formation.  Both are similar in appearance, they show up at the same place in an existing trend, and have the same volume characteristics.  

 


Flag Pattern Identification

The Flag Pattern occurs after a strong upward price move and the stock price then consolidates in a narrow descending channel. Ultimately, the stock price will break out from the descending channel and resume the upward move. The volume, as with most breakout signals, should be strong during the breakout to confirm the signal.

Illustration of a Flag Pattern


FLAG PATTERN Application

The Flag Pattern is considered to be a "continuation Pattern", with the original trend resuming after a period of consolidation.  The price movement prior to the flag should be a strong, sharp move.  Upon breakout, the initial target price is equal to the distance of the prior move added to the breakout point. 

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