Measuring Flags and Pennants
This chapter explains how the measure rule applies to flags and pennants, and how traders can use it to predict a trend change.
Traders knowledgeable about flags and pennants know them as half-staff patterns. That means they can appear midway in a price trend. Let me explain using Exhibit 21.1.
The position of pennant BC is about midway in trend AD. Since you know the length of the flagpole (AB), you can project the price where the trend could end. It does not always work, of course, but flags and pennants are handy when you need to determine a trend’s lifetime.
The Measure Rule
If BC is the midpoint in the price ...
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