Flag
The flag is a continuation pattern: after a strong, fast move (the pole), the price pauses in a small channel sloping against the trend, before moving on.
The bull flag has a rising pole and a slightly descending channel; the bear flag a falling pole and a slightly ascending channel. If the pause takes the shape of a small triangle it's called a pennant.
How to spot it
A pole: a large move in a few sessions. A flag: a short consolidation, narrower than the pole, with parallel highs and lows sloping in the opposite direction. The pattern is complete when the channel breaks in the direction of the pole; the indicative target is the length of the pole projected from the breakout.
Worked example
A stock rises from €10 to €13 in four sessions (a €3 pole), then slowly falls to €12.40 in a narrow channel. If it breaks out of the channel upwards at €12.70, the indicative target is 12.70 + 3 = €15.70.
How to read it
Flags usually form in a few sessions: if the pause lasts too long or retraces more than half of the pole, the pattern loses value.
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