Flag & Pennant Patterns

Continuation patterns that form during pauses in strong trends.

Pattern Structure

Components: Flagpole (strong impulsive move) → Flag/Pennant (consolidation) → Breakout (continuation).

• Bull Flag — Strong upward pole, downward-sloping rectangular channel, breaks upward
• Bear Flag — Strong downward pole, upward-sloping rectangular channel, breaks downward
• Pennant — Strong move (pole), symmetrical triangle consolidation, breaks in pole direction

Workflow

1. Get Swing Point Data

Identify the flagpole and consolidation boundaries:

get_candles_around_date(symbol=<symbol>, exchange=<exchange>, interval=<interval>, date=<flag_date>)

2. Draw Flag/Pennant Boundaries (2 parallel calls)

For flags (2 parallel trend lines sloping against the pole):

# Upper flag boundary
draw_chart_analysis(action="create", drawing={
    "type": "trend",
    "points": [
        {"time": <flag_high1_time>, "price": <flag_high1_price>},
        {"time": <flag_high2_time>, "price": <flag_high2_price>}
    ],
    "options": {"text": "Flag R"}
})

# Lower flag boundary (parallel to upper)
draw_chart_analysis(action="create", drawing={
    "type": "trend",
    "points": [
        {"time": <flag_low1_time>, "price": <flag_low1_price>},
        {"time": <flag_low2_time>, "price": <flag_low2_price>}
    ],
    "options": {"text": "Flag S"}
})

For pennants: same approach but lines converge (like a small symmetrical triangle).

3. Confirm and Enter

Confirm declining volume during consolidation via get_indicators(indicator_code="mfi", symbol=<symbol>, exchange=<exchange>, interval=<interval>).

Standard: Enter on break of flag/pennant boundary with volume spike. Stop beyond opposite side. Conservative: Wait for breakout + retest of boundary. Enter on bounce. Target: Flagpole length projected from breakout point.

Evidence and Validation

• Treat the setup as a testable hypothesis, not a prediction. Define thresholds, entry, invalidation, and exit before evaluating outcomes.
• Calibrate on the same instrument, venue, session, and timeframe. Use closed candles and a held-out or walk-forward sample; record every variant tried.
• Include spread, fees, slippage, borrow or funding, partial fills, and latency. Reject the setup when net expectancy is not positive or depends on one narrow parameter.
• Return observed inputs, missing data, cost assumptions, entry, invalidation, exit, and a valid, watch, or no-trade status.
• Research basis: Lo, Mamaysky & Wang supports objective pattern definitions and conditional testing rather than visual labels alone.

Key Rules

• Quantify the pole with return divided by ATR and a maximum bar count; “looks impulsive” is not reproducible
• Define and calibrate the maximum retracement rather than assuming 50% is universal
• Treat volume contraction and breakout expansion as candidate filters; report their measured values
• Quick formations are more reliable than extended consolidations
• Flag duration should be short relative to the pole

Related Skills

• triangle-patterns — Pennants are small symmetrical triangles
• channel-trading — Flags are short-duration trending channels