Chartered Market Technician Practice Exam 2026 – Complete Prep Guide

The correct answer highlights the flag pattern, which is characterized by a consolidated move that occurs after a significant price movement. Flags often take the form of a rectangle that slopes against the prevailing trend, visually resembling a flag on a flagpole.

When prices consolidate in this manner, it is often considered a pause in momentum rather than a reversal, indicating that the prevailing trend is likely to continue. Traders view flags as continuation patterns, and they typically anticipate a breakout in the direction of the trend preceding the formation of the flag. This breakout can lead to a substantial price movement, aligning with the premise of the question regarding the pattern preceding a large price move.

In contrast, other patterns such as wedges, head and shoulders, and double tops serve different purposes in technical analysis. Wedges often indicate potential reversals, head and shoulders signal a trend reversal, and double tops suggest a failure to maintain upward momentum, all of which act differently compared to the continuation behavior exhibited by flag patterns.