You'll find these patterns on almost any time frame, but when you discover a flag or pennant on a large time frame (daily or higher), you can expect the development of trading activity to be interesting over the next several days, weeks, or months. Take a look at this chart:
Without much fundamental data, having a good technical eye one can see a pennant forming as outlined by the lines drawn. Notice that price movement can make a false break of any trend line. So, you see that you can also have parallel channels that contain price movement while sustaining the pattern of consolidation until confirmation comes in one direction or the other (On Dec. 5, 2008 we had a high print of 1.3008 which has to be taken into consideration when drawing the upper pennant trend line. Thus, a parallel zone in the upper pennant is created which needs to be broken to give us a good signal of upper movement). In this case, a sustained move and break above 1.2700 or below 1.2200 would determine where we go from here.
Currently, this USDCAD pair is trading without much conviction, so caution is necessary toward the up side, but this will be one to watch over the weeks to come.
For more info. on chart flags & pennants or other chart patterns, visit the following link:
http://www.prosticks.com/education/chart_patterns/
Happy Trading!
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