# Technical Figures 2: Flag/Pennant

Last week we analyzed some trend reversal formations such as the double bottom or double top, so this time I want to show you a trend continuation figure such as the Flag or Pennant.

It is a figure that is formed by a very pronounced movement in one direction (mast) that subsequently generates a consolidation zone (Flag) and is confirmed with the creation of a new high (in bullish flags) or a new low (in bearish flags) that breaks the consolidation zone and generates a replica in the same direction as the first movement.

In the image we see a bullish pennant, which as I indicated is created after that pronounced upward movement “C” which then generates a consolidation zone between “A” and “B” and ends up confirming when it breaks the point “D”.

In order to identify this figure correctly, it is necessary to pay attention to two fundamental aspects. Firstly, the starting movement of the figure (in the image marked as C) must be very pronounced and must have a high trading volume to create that momentum that shapes the flagpole.

Secondly, the consolidation move (the pennant created between A and B) must generate a retracement that is located at the 0.236 and 0.382 Fibonacci Retracement of the C move, although in some formations we can see fakeouts that reach the 0.50 retracement.

If these conditions are met, the figure would be identified but we would remain attentive to the confirmation of the same, which in this case occurs when the price manages to break the trend A, generating a new high ( point D in the previous image).

If this situation is fulfilled, we can expect a replica movement of the same size as “C”, from the moment of its breakout, but it does not always meet 100% of the target, so it is advisable to use the Fibonacci Extension tool to mark the targets.

Depending on the level of the retracement of the low generated in the trend “B”, we will set the targets of the figure. If the retracement is 0.236, the targets most likely to be met are 0.618 and 1 of the Fibonacci extension of C- A-B. If the retracement is between the 0.382 and 0.5 level, the most likely targets are 1 and 1.272 of the Fibonacci C-A-B extension.

Below we will see some chart examples to clarify these points, but first I would like to specify that the consolidation zone can be generated in the form of a wedge, as in the example above, but it can also be formed by a channel or a descending triangle, as we see in the following image.

Let’s start with an example of a bullish flag on the 15-minute chart of \$ETH, which occurred during this week.

As we can see, the first two criteria to take into account to identify the figure are met. The mast is created in a pronounced way and with a very high volume and subsequently the price creates that consolidation zone at the 0.236 level of the Fibonacci Retracement of the initial impulse.

Therefore, in order to confirm the figure, it would be necessary to break the maximum of reference of the flag, which as we can see in the following image occurred the next day, confirming the flag and reaching its first target, the level 0.618 of the Fibonacci extension is traced in the following chart.

Currently, the figure has fulfilled its first objective and we will have to be attentive to its evolution to check if it fulfills the second objective.

Another aspect to take into account in these formations is the period at which they are identified, the greater the period of visualization of the graph, the greater the probability of fulfilling the figure. That is, this 15-minute chart formation has a lower probability of being fulfilled than a formation in a longer display period.

So I wanted to show you an example of a Bullish Pennant on a 1-day candlestick chart.

In this example, the two fundamental criteria of the figure are also met, the momentum generated by the high is very pronounced and with high volume and the consolidation zone generates a retracement that falsifies the 0.382 Fibonacci level.

In this case, the consolidation zone is created with a bullish wedge, which ends up confirming new high, that breaks the trend and we can see it marked on the chart with a yellow rectangle.

On the retracement to the 0.386 level area, we will draw the Fibonacci extension with this retracement and set targets at levels 1 and 1.272.

As we can see, both objectives are more than fulfilled, despite the fact that the initial impulse stops at level 1 of the Fibonacci extension, generating a rejection to later generate that Bull-Run.