The Flag and Pennant Formations, which are likely to be encountered frequently, are similar in the way they appear. Although both signal that the market will continue in the direction of its course, they are different from each other in terms of appearance. Patterns show the horizontal movement areas that follow the high volume of hard movements. Measurements in both formations are made in the same way. They can be slightly upward inclined in falling markets and downward sloping in emerging markets. During the sharp movement that precedes the formation of the formation, the trading volume is high and the movement in a straight line is defined as the ‘Flagpole’. After the breakout, the price is expected to move as much as the flagpole we are talking about.
In technical analysis, the pennant is a kind of continuation pattern that occurs when there is a large movement in a security known as a flagpole, followed by a period of consolidation with the pennant having converging trend lines, followed by a breakout movement in the same direction.
Flag Formation
Although it is frequently seen in the markets, it is an important component that analysts rely on and is also a continuation pattern. This continuation pattern also means the continuation of the trend. A reversal formation is not accepted.
A flag pattern is a short-term fast-paced pattern. The main thing is to create the expectation of a fall or rise as much as the height of the so-called pole of the flag. After a very sharp price rise on the upside, a short-term correction movement to the opposite direction is occurring.
After the correction movement, an upward movement can be expected again. As a result of this upward movement, a flag-shaped formation can be called a flag formation.
Pennant Formation
Structurally, it is similar to the flag formation. The only difference that distinguishes the two formations from each other is their shape. The fluctuation of the ascending trend in the form of a decline is referred to as a flat pennant pattern, while the trend in the opposite case is called a reverse pennant pattern. After a rapid rise in an uptrend, the price stalls. With it, downward and upward movements occur.
At the end, the volume is narrowed and a triangle (streamer) shape is formed. At the same time, in the formation of the Pennant, it is very important in which direction the flag is located. If it breaks out of the top, it means that there will be a decline. While the uptrend is fast and in line, the price pauses after the rise. Then its direction begins to change upwards and downwards.
In contrast to normal patterns, in downtrends, it is possible to encounter ‘Reverse Flag’ and ‘Reverse Flag’ patterns. There is no difference in terms of definitional or pattern target price calculation.
