Chart Pattern
AI Explanation

Bull Flag & Bear Flag

Continuation patterns that appear as a brief consolidation against the trend before continuation.

Plain English Explanation

Flags are like catching your breath during a sprint. The trend pauses briefly, then continues in the same direction.

**Bull Flag:**

- Forms during uptrend

- Sharp rally up (the flagpole)

- Slight pullback/consolidation (the flag) - slopes DOWN

- Breakout continues upward

**Bear Flag:**

- Forms during downtrend

- Sharp drop down (the flagpole)

- Slight rally/consolidation (the flag) - slopes UP

- Breakdown continues downward

**The psychology:**

After a strong move, early traders take profits. New traders wait for pullback to enter. Once the flag "completes," everyone piles in the same direction.

**Key feature:** The flag should slope AGAINST the trend (bull flag tilts down, bear flag tilts up). If it slopes with the trend, it's more likely a reversal.

How It Works (Technical)

Flags represent a pause in momentum as traders book profits. The pattern typically retraces 30-50% of the flagpole. Low volume during the flag and high volume on breakout confirms the pattern.

When It Works Best

  • After strong impulsive moves
  • In trending markets
  • With clear flagpole (strong initial move)
  • When volume contracts during flag, expands on breakout
  • All timeframes

When It Fails

  • In range-bound markets
  • When flag is too large (more like channel)
  • Without proper flagpole
  • If flag retraces more than 50%
  • Late in extended trends (exhaustion)

Common Beginner Mistakes

  • 1Entering before the breakout
  • 2Confusing flags with channels
  • 3Ignoring volume confirmation
  • 4Trading flags without clear prior trend
  • 5Not measuring target from flagpole

Pro Tips

  • Target = flagpole length from breakout point
  • Best flags have 3-5 bars in the flag portion
  • Tight, orderly flags are more reliable
  • Volume should dry up during flag
  • Combine with moving average support

Related Topics

MA

Moving Averages (SMA & EMA)

Volume

Volume Analysis

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