Flag pattern

neutral · continuation pattern

A flag is a short-term continuation pattern formed by a sharp directional move (the "flagpole") followed by a brief, contrary-direction parallel-channel consolidation. Bull flags slope down or sideways after an up-move; bear flags slope up or sideways after a down-move. Resolution typically lasts 5–15 bars.

Formation rules

Strong directional flagpole
Tight parallel-channel consolidation against the trend
Volume contracts during the flag
Breakout in the flagpole's direction

How to trade it

Enter on breakout from the flag in the flagpole's direction. Stop just beyond the opposite flag boundary. Measured target = flagpole height added to breakout. Flags work especially well during earnings drift and post-news momentum.

Common pitfalls

Sloppy / wide consolidations are not flags — they're ranges
Flags older than 20 bars usually resolve as failures

Statistical context

Bulkowski: bull flags ~67% continuation rate; bear flags ~58%. Tightness of the consolidation is the strongest predictor of follow-through.

Related patterns

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