Flags and Pennants are continuation patterns that mark brief pauses, or resting periods, during dynamic market trends. Both are usually preceded by a steep price move (called the pole). In an uptrend, the steep advance pauses to catch its breath and moves sideways for two or three weeks. Then the uptrend continues on its way.
The names aptly describe their appearance. The pennant is usually horizontal with two converging trend-lines (like a small symmetrical triangle). The flag resembles a parallelogram that tends to slope against the trend. In an uptrend, therefore, the bull flag has a downward slope; in a downtrend, the bear flag slopes upward. Both patterns are said to “fly at half mast”, meaning that they often occur near the middle of the trend, marking the halfway point in the market move.