Flag and Pennant

Flag and pennant are considered as bullish signal, indicating that the current uptrend may continue.

A Pennant (Bullish) follows a steep, or nearly vertical rise in price, and consists of two converging trendlines that form a narrow, tapering flag shape. The Pennant shape generally appears as a horizontal shape, rather than one with a downtrend or uptrend.

Apart from its shape, the Pennant is similar in all respects to the Flag. The Pennant is also similar to the Symmetrical Triangle or Wedge continuation patterns however; the Pennant is typically shorter in duration and flies horizontally.

A Flag (Bullish) follows a steep, or nearly vertical rise in price, and consists of two parallel trendlines that form a rectangular flag shape. The Flag can be horizontal (as though the wind is blowing it), however it often has a slight downtrend. A bullish signal occurs when the price rebounds beyond the upper trendline of the Flag formation, and continues the original upward price movement. This is considered a pattern confirmation.

How to trade these patterns?

Always trade Flag and Pennants in the direction of the previous (main) trend. If the previous trend was up, wait for a break out to the upside and go long when the currency pair rises above the upper resistance trend line. Place your stop below the lower support trend line.