01Flags and pennants: continuation
A flag is a short, orderly counter-trend drift — a small channel — after a sharp move called the pole. A pennant is the same idea with converging lines. Both show profit-taking without real opposition: the trend is resting, not reversing.
Flag target
breakout level + pole length
The pole is measured from the start of the impulse to the top of the flag.
- Strong, fast pole — ideally a few large-bodied candles
- Shallow pullback (often less than 50% of the pole)
- Quiet, declining volume inside the flag
- Breakout on expanding range or volume
02Wedges: exhaustion
A rising wedge climbs inside two upward-sloping lines that converge: each push higher gains less ground than the last. Buyers are still winning, but by smaller margins — a classic sign of exhaustion that usually resolves down. A falling wedge is the bullish mirror.
Bull flag
- Sharp pole, then a gentle drift down
- Parallel boundaries
- Continuation higher
Rising wedge
- Slow, grinding advance
- Converging, upward-sloping boundaries
- Exhaustion and reversal down
Key takeaways
- Flags and pennants are pauses inside strong trends.
- Target ≈ breakout level + pole length.
- Rising wedges usually break down; falling wedges usually break up.
- Quality comes from a strong pole, a shallow pause and quiet volume.
Common mistakes
- Calling every pullback a flag, even after a weak move
- Buying the top of the flag instead of the breakout or the lower boundary
- Ignoring wedges because the trend still looks intact
Complete “Classical Patterns” to unlock this challenge.