Flags & Pennants — the Pause That Refreshes

The anatomy

A flag = a sharp, high-volume move (the pole), then a tight, slightly counter-trend consolidation on SHRINKING volume (the flag), then a breakout to continue. The logic is mechanical: strong momentum, then profit-taking that finds few sellers, then the next wave of buyers. Pennants are the same with converging triangle-shaped consolidation.

Measurement & quality

Classic target: the pole projected from the breakout point. Quality checks: the pole should be near-vertical on big volume; the flag shallow (retracing < ~38% of the pole) and SHORT (a "flag" that lasts weeks is a new trend, not a flag); volume must dry up in the flag and expand on the break.

The trap

A deep, long, rising-volume consolidation is NOT a flag — it is distribution wearing a flag costume. The pattern is 80% volume behavior; the shape alone lies.

Sources

• Flag PatternInvestopedia
• Encyclopedia of Chart PatternsThomas Bulkowski