The Market's Halftime Break: Flags, Pennants, and Gap Analysis

Flags Fly at Half-Mast

Flags and Pennants are among the most reliable continuation patterns. They typically form after a near-vertical "flagpole" price move, representing a pause for breath.

Key Feature: Volume must shrink significantly during formation.

Measurement: They often mark the midpoint of a move. The target post-breakout equals the length of the flagpole.

The Language of Gaps

Gaps are empty spaces on the chart.

Common Gap: Within a trading range, little significance.

Breakaway Gap: Jumps out of a pattern with volume; a strong trend signal.

Runaway (Measuring) Gap: Occurs in the middle of a trend; used for targets.

Exhaustion Gap: Appears at the end of a trend, often followed by a reversal.