Flags and Pennants

Flag and Pennant

Flag

The flag is one of the most "secure" formations. It is most often formed in the timeline from 3 to 4 weeks for stocks and 1 to 2 days for crypto and occurs after a very fast (almost vertical) price movement. The flag announces the continuation of traffic in a given direction.

During the formation of the flag, the volume of turnover should decrease very clearly. The range of movement after breaking from the formation should be at least equal to the size of the movement to reach it, measured from some characteristic point - eg from breaking from the previous formation or breakthrough of resistance level (measurement of movement is marked with a vertical purple line). Perfectly in line with the pattern, the flag announces the continuation of the specified range with a probability of up to 90%.

When assessing the correctness of the flag, remember that:

• formation should occur after almost vertical movement of prices (without major corrections)
• the volume should decrease very clearly during formation formation
• if the formation takes long to establish, then it could be very suspicious. Therefore don't wait to long. 
• when broken up, the volume should clearly increase.

Strategy

Price increase Flag (Figure 1)

If you have shares:

• sell if there was a distinct increase in volume during the movement that did not lead to the breakout
• sell if the break has not occurred within 3 weeks or 3 days for crypto of the beginning of the formation and the volume does not behave perfectly according to the theory
• if it breaks down, sell it immediately

If you do not have shares:

• buy after the formation of the pattern with a good volume system, do not waiting for the upward break its better to set a stop loss if broken down

Flag with access from the top (Figure 2)

If you have shares:

• sell after the formation formation (even before the break)

If you do not have shares:

• do not buy (even after breaking up)

Market example

Pennants

The Pennant is next to the flag one of the most "certain" formations. It is most often formed in the period from 3 to 4 weeks and occurs after a very fast (almost vertical) price movement. Pennant announces the continuation of movement in a given direction.

flag formation

During the formation of the pennant, the volume of turnover should decrease very clearly. The range of movement after breaking from the formation should be at least equal to the size of the movement to reach it, measured from some characteristic point - eg from breaking from the previous formation or breakthrough of resistance level (measurement of movement is marked with a vertical purple line). Ideally aligned with the pattern, the flag announces the continuation of the specified range with a probability of up to 90%.

When assessing the correctness of the pennant, keep in mind that:

• formation should occur after almost vertical movement of prices (without major corrections)
• the volume should decrease very clearly during formation formation
• the end of the formation should take place in less than 3 weeks for stocks and 3 days for crypto from the beginning of the formation - pattern longer than 3 weeks are already suspicious (the beginning of the formation was marked with the letter B in the drawing, the end with the letter E)
• when broken up, the volume should clearly increase.

Strategy 

Flag with access from the bottom (Figure 1)

If you have shares:

• sell if there was a distinct increase in volume during the movement that did not lead to the breakout
• 
  
• if it breaks down, sell it immediately

If you do not have shares:

• buy after the formation formation with a good rotation volume system, not waiting for the upward break (if you sold earlier - when you reach the formation, buy even at higher prices)

Flag with access from the top (Figure 2)

If you have shares:

• sell after the formation (even before the break).

If you do not have shares:

• do not buy (even after breaking up)

Market example

SHARE

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