Lesson T5.4 · 4 of 6 · Chart patterns
Flags, pennants and rectangles: how to spot them and set a target
Flags, pennants and rectangles are pauses in a trend: the price catches its breath before the next move. The classic flag target is the length of the flagpole, added to the breakout price. It is no sure rule: in Bulkowski’s tests, almost half of all flags were not followed by even a 5% move.
Terms in this lesson
- Support and resistance
- Prices at which a stock has often stopped falling or stopped rising.
- Trading volume
- How many shares were bought and sold in a day.
- Stop-loss
- An order that sells automatically if the price falls to a level you choose.
Flags, pennants and rectangles: pauses in a trend
Definition
What is a flag?
A short pause between two parallel lines after a steep move.
The steep move before it is called the flagpole. The flag usually slopes against the trend: after a rise it drifts down, after a fall it drifts up. Bulkowski limits it to less than three weeks. Volume falls during the flag in about three quarters of his cases.
- Breakout
The price sits at 100, then shoots up over six days to 115.40 on heavy volume: the flagpole. For the next nine days it drifts lower between two parallel lines on falling volume: the flag. The price breaks above the upper line with a close at 113.40 on high volume, then climbs towards 124.60.
| Pattern | Shape of the pause | Bulkowski’s guideline |
|---|---|---|
| Flag | two parallel lines sloping against the trend | under 3 weeks |
| Pennant | two converging lines, like a small triangle | 3 weeks at most; volume falls 86% of the time |
| Rectangle | a flat ceiling and a flat floor | at least 3 touches on one line and 2 on the other |
Flags and pennants follow a flagpole. A rectangle is a wider pause, with the price bouncing between the same two prices.
A pennant looks like a flag, but its lines converge:
- Breakout
The price shoots up from about 95 to 108, then swings for nine days between two converging lines: the highs fall from 108.60 and the lows rise from 104.60. The price breaks out upwards and climbs towards 116.
A rectangle is a pause between a flat ceiling and a flat floor:
- Breakout
After a rise from 92 to 106, the price swings between 100.00 and 106.00, touching each line three times. It then closes at 107.20, above the ceiling, and climbs towards 110.
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Create a free accountThe flag target: the measured move
Definition
What is the measured move?
The length of the flagpole, added to the breakout price.
The idea: after the pause, the price travels the same distance again. On the first chart, the flagpole rises from 100.00 to 115.40, so it is 15.40 long. If the price breaks out of the flag at around 111.60, the target is about 127. For a rectangle, you use its height instead of a flagpole.
Why flags fail
These are Bulkowski’s figures for US stocks in bull markets. Pennants failed even more often: 54% in both directions. The average move after a flag was small too: 9% after upward breakouts and 8% after downward ones, measured over the short swing after the breakout, not to the ultimate high or low. One likely reason: a flag is a short pattern, and a few choppy days can easily break it.
Real case
A flag that failed
The price breaks out upwards, then drops below the flag’s low.
The breakout looked right: a close above the upper line at 113.00. Over the next few days the price slipped back into the flag and then below its low at 110.00. Anyone with a stop-loss just below the flag’s low got out with a small loss; anyone without one watched a fall towards 104.
- Breakout
A flagpole from 100 to 115.40, then a flag drifting lower between two parallel lines. The price closes above the upper line at 113.00, but over the next few days it slips back into the flag, closes below the flag’s low of 110.00 and falls towards 104.
Lessons are educational. They are not a recommendation to buy or sell. Investing involves risk and you can lose money. Sources: Thomas N. Bulkowski, thepatternsite.com (flags, pennants, rectangle tops, rectangle bottoms and the glossary), accessed 29 October 2026. The charts are teaching diagrams, not real prices.