Flags and pennants

Flags and pennants are short-term continuation patterns that mark a small consolidation before the previous motion to continue. These models are usually preceded by a sharp increase or decrease in the high and mid-point of motion.

1. A sudden movement: to consider this model as a model to continue, should be a prior trend. Flags and pennants require a sharp increase or decrease at a high level. These movements usually occur at a high level and may contain GEPy. This movement is usually the first stage of a significant increase or decrease, and a flag or pennant is just a pause.

2. Flagpoles: flagpole - is the distance from the first support to overcome resistance or to the maximum or minimum of a flag or pennant. A sharp increase (or decrease), which forms the flagpole should overcome the trend line or resistance level or support. The line, built by this breakthrough to the maximum or minimum of a flag or pennant shapes flagpole.

3. Flag: model «flag» is a small rectangle that is tilted against the direction of the previous trend. If the previous movement was upward, then bent down to flag down. If the previous movement was down, the flag is bent down to up. Since the model «flag» is usually too short in duration, to have actual reactionary maxima and minima, the price should be active only occur within two parallel trend lines.

4. Streamer: model «pennon» is a small symmetrical triangle that begins with the widest part and converges, as a model (like the cone). The slope is usually neutral. Sometimes will not be certain reactionary maxima and minima, to conduct trend line and price activity should only occur within the converging trend lines.

5. Duration: flags and pennants are short-term models, which can last from 1 to 12 weeks (full time schedule). There is some controversy on the duration, and some analysts believe that 8 weeks is the limit for a reliable model. Ideally, when these patterns are formed in the period from 1 to 4 weeks. Once the flag has continued over 12 weeks, then this model is classified as a rectangle. Streamer more than 12 weeks will turn into a symmetrical triangle. The reliability of models, which continue from 8 to 12 weeks is highly debatable.

6. Breakthrough: for bovine flag or pennant break above resistance signals that the previous increase was resumed. For the Bear flag or pennant break below support signals that the previous decline has resumed.

7. Volume: The volume must be high during the increase or decrease, which forms the flagpole. The high volume provides legitimacy for the sudden and dramatic movement, which forms the flagpole. The increase in breaking the resistance (support) gives credibility of the reliability of the formation and continuation probabilities.

8. Objectives: The length of the flagpole can be used to break the resistance or support break flag or pennant, to assess the value of a subsequent increase or decrease.
Even though the flags and pennants are the usual models, the basic principles of their identification should not be ignored. It is important that the flags and pennants are preceded by a sharp increase or decrease. No sudden movements, the reliability of the model becomes highly questionable, and the sale of this model may carry additional risks. Look for confirmation of the amount in the initial move, consolidation and renewal of the movement to improve the reliability of the identification of these models.

Schedule «Hewlett-Packard» shows an example of a model «flag», which is formed after a sharp and sudden increase.

• A sudden movement: after the consolidation of three months, «Hewlett-Packard» broken resistance at the top 28 to begin a sharp increase. Trend line is built for maximum of 5 April and 16 February, has resisted, and her breakthrough came with the increase in volume. The price has increased from 28 to 38 in less than 4 weeks. (Note: is also possible that a small pennant was formed in early May with an impedance of approximately 31).

• flagpole: the distance from the break of resistance at 28 to a maximum of 38 formed a flag flagpole.

• Flag: pricing activity took place within two parallel trend lines that are bent down.

• Duration: a maximum of 38 to break at 36, a flag, a 23-day period.

• Breakthrough: the first break above the upper trend line of the flag took place on June 21 without an increase in volume. However, the price of GEO has made up a week later and a strong closing with a higher than average (red arrows).

• Volume: to confirm the model of the volume increase in the breakthrough to form a flagpole, was quite limited during the formation of the flag and increased immediately after a subsequent break of resistance flag.

• Objectives: The length of the flagpole is 20 points and was added to break the resistance at 36 for the design objectives in the region of 46.