Flag

AAA

DEFINITION of 'Flag'

A technical charting pattern that looks like a flag with a mast on either side. Flags result from price fluctuations within a narrow range and mark a consolidation before the previous move resumes. Likewise, "pennant" formations are usually treated like flag formations because they are very similar in appearance, tend to show up at the same place in an existing trend, and have the same volume and measuring criteria.

Flag

INVESTOPEDIA EXPLAINS 'Flag'

Flags and pennants are among the most reliable of continuation patterns and only rarely produce a trend reversal. The only difference between the two patterns is that a flag resembles a parallelogram (or rectangle) marked by two parallel trend lines that tend to slope against the prevailing trend. The pennant, however, is identified by two converging trend lines and more horizontal which resembles a small symmetrical triangle. The important thing to remember is that they are both characterized by diminishing trade volume and though different, the measuring implications are the same for both patterns as demonstrated in the above illustration.

RELATED TERMS
  1. Consolidation

    In technical analysis, the movement of an asset's price within ...
  2. Pennant

    A continuation pattern in technical analysis formed when there ...
  3. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  4. Wedge

    In technical analysis, a security price pattern where trend lines ...
  5. Triangle

    A technical analysis pattern created by drawing trendlines along ...
  6. Fintech

    Fintech is a portmanteau of financial technology that describes ...
RELATED FAQS
  1. What are the most common continuation patterns?

    A continuation pattern is a price action formation indicating that a larger overall trend is pausing in the short term but ... Read Full Answer >>
  2. How are double exponential moving averages applied in technical analysis?

    Double exponential moving averages (DEMAS) are commonly used in technical analysis like any other moving average indicator ... Read Full Answer >>
  3. How do you know where on the oscillator you should make a purchase or sale?

    Common oscillator readings to consider making a buy or sale are below 20 or above 80, respectively. More aggressive investors ... Read Full Answer >>
  4. What are the alert zones in a Fibonacci retracement?

    The most commonly used Fibonacci retracement alert levels are at 38.2% and 61.8%. A 50% retracement level is also commonly ... Read Full Answer >>
  5. How was the Fibonacci retracement developed for use in finance?

    The use of Fibonacci retracements in stock trading was popularized by noted technical analysts W.D. Gann and R.N. Elliott. ... Read Full Answer >>
  6. How can a swing trader use a Fibonacci retracement?

    Swing traders can use the Fibonacci retracement to determine levels of support and resistance for a price on a chart, as ... Read Full Answer >>
Related Articles
  1. Forex Education

    Tweezers Provide Short-Term Precision For Forex Traders

    Precise and short, the tweezer setup is similar to the more popular double top/bottom formations.
  2. Forex Education

    Profiting From Carry Trade Candidates

    Capitalize on the yield of the interest rate differential by using flags and pennants.
  3. Charts & Patterns

    Continuation Patterns: Rectangles and Pennants

    Flags and pennants indicate direction of activity of the prevailing trend. Learn how.
  4. Charts & Patterns

    Continuation Patterns: An Introduction

    Those random movements in the charts actually form patterns. Learn the basics of what these patterns are.
  5. Options & Futures

    Trade Forex With A Directional Strategy

    Opening long or short positions to cash in on a trend is one of the simplest ways to trade forex.
  6. Forex Education

    Forex Consolidation Trading - Trade The Calm, Profit From The Storm

    Capture quick profits with the powerful directional biases of these two patterns.
  7. Fundamental Analysis

    20-Year Treasury Bond ETF Trading Strategies

    iShares 20-Year Treasury Bond ETF offers a highly liquid equity alternative to direct bond exposure.
  8. Technical Indicators

    How To Interpret The Volume Zone Oscillator

    Introduced in 2009, the Volume Zone Oscillator (VZO) is gaining traction with traders and technicians.
  9. Stock Analysis

    Where Does Yahoo (YHOO) Go From Here?

    Yahoo operates in a competitive environment, but if it makes the right deals there's no reason why it can't thrive.
  10. Trading Strategies

    Uncovering Evidence Of Sector Rotation

    Stalk ETF performance lists over several weeks to uncover hidden institutional buying and selling strategies.

You May Also Like

Hot Definitions
  1. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  2. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  3. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  4. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  5. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  6. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!