Pennant or flags chart patterns

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Pennant or flag chart patterns are a continuation pattern that occurs during an uptrend or downtrend in a stock's price. This pattern is formed when there is a temporary pause in the price movement of the stock before continuing in the direction of the original trend.

A pennant pattern resembles a small symmetrical triangle, while a flag pattern resembles a small rectangular shape. These patterns are characterized by a period of consolidation or sideways trading that forms a shape that looks like a flag or pennant.

To recognize a pennant or flag pattern, traders should look for a sharp price move, followed by a period of consolidation where the price moves in a sideways direction. This consolidation period should be characterized by decreasing trading volume, indicating a lack of interest in the stock.

Once the pennant or flag pattern is identified, traders can use it to make trading decisions. A breakout from the pattern in the same direction as the original trend is seen as a signal to enter a trade. Traders can set a stop loss order just below the bottom of the flag or pennant pattern to limit their risk.

To measure the potential price target for the breakout, traders can measure the distance between the high and low points of the flag or pennant pattern, and then add or subtract that distance from the breakout point. This gives traders an idea of where the price could potentially move after the breakout.

It is important to note that pennant and flag patterns can be tricky to trade, as they are often preceded by a strong price move that can quickly reverse direction. Traders should always use proper risk management techniques and closely monitor their trades to avoid large losses.