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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