Flag - Continuation Chart Pattern
Flag Chart Formation Definition
A flag chart formation occurs after a security experiences an impulsive up or down move. After such a strong run-up, the security will take a "breather" before continuing in the direction of the primary trend. This breather takes place in the form of a rectangular structure, hence the term "flag", while the impulsive move or "pole" completes the formation. While inside the flag, there are a number of minor price fluctuations that occur on light volume. After this quiet period, the security will eventually erupt out of this consolidation zone with an increase in price and volume. The breakout from the flag will often times be equivalent to the impulsive move prior to entering the rectangular structure. The flag chart pattern formation is one of the more reliable continuation patterns.