The flag formation is characterized by narrow oscillations contained within two bands that form a channel. Typically, the channel is either in the direction of the trend or against it. The pattern has a higher degree of predictive capability if the channel is in the opposite direction to the main trend. These two options are illustrated in the below figures.

The pattern is complete upon the break of the upper line that marks the boundary of the channel. The number of oscillations in the flag is not important. That will vary depending on the time horizon of the chart you are using. I traded a continuation pattern recently that looked quite different on a one-minute chart from how it appeared on a five-minute chart, both of which are shown in the below figures.

In this instance, the stock had fallen in premarket activity on weak bad news and staged a strong recovery in the Phase 1 market period. As no trends have been formed this early in the market, any trades that I enter are usually either the result of the first move in the opposite direction of the premarket gap, or of continuation patterns if I miss the first move. In this case, I missed the first move against the gap and took a long position as close to the entry point as I could get. In this situation the trade worked out well, and I exited the position when the upward move positioned the flag at halfway in the trend. Typically, a consolidation flag will appear halfway within a move, which has led to the expression: „Technical flags fly at half mast.“ What actually happened in this case was that the stock moved appreciably higher than the point at which I exited. On a technical basis, however, holding the position beyond what was predicted by the continuation pattern would have moved me into the hope and away from the reality column. Over time, that most likely will lead to diminished returns.