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Flags and pennants are continuation patterns.
They usually represent only brief pauses in a dynamic market.
They are typically seen right after a big, quick move. The
market then usually takes off again in the same direction. Research
has shown that these patterns are some of the most reliable continuation
patterns.
Bullish
flags are characterized by lower tops and
lower bottoms, with the pattern slanting against the trend. But
unlike wedges, their trendlines run parallel.
Bearish
flags are comprised of higher tops and
higher bottoms. "Bear" flags also have a tendency to
slope against the trend. Their trendlines run parallel as well.
Pennants look very much like symmetrical
triangles. But pennants are typically smaller in size (volatility)
and duration.
(Volume generally contracts during the pause with
an increase on the breakout.)
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miracles,
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