Bullish & Bearish Flags
Flags are among the most reliable continuation patterns in technical analysis. They usually appear after a strong, sharp price move (called the flagpole) and signal that the trend is likely to continue once the pattern completes.
Structure of a Flag Pattern
- Flagpole: The strong initial price move (up or down)
- Flag: A small consolidation phase where price moves in a parallel channel, sloping against the main trend
- Breakout: The continuation of the original trend after the flag
Bullish Flag
- Trend Context: Appears after a strong uptrend
- Appearance: Price shoots upward (flagpole), then consolidates in a small down-sloping channel
- Signal: Once price breaks above the flag, the uptrend is likely to continue
Trading It:
- Entry: On breakout above flag resistance
- Stop Loss: Below the flag’s support line
- Target: Length of the flagpole projected upward
Bearish Flag
- Trend Context: Appears after a strong downtrend
- Appearance: Price drops sharply (flagpole), then consolidates in a small up-sloping channel
- Signal: Once price breaks below the flag, the downtrend is likely to continue
Trading It:
- Entry: On breakout below flag support
- Stop Loss: Above the flag’s resistance line
- Target: Length of the flagpole projected downward
Key Tips for Trading Flags
- Volume Confirmation: Look for decreasing volume inside the flag, then increasing volume on breakout
- Timeframes: Reliable on 1H and higher, but also useful for scalpers on lower TFs
- Patience: Never enter inside the flag—wait for the breakout
- Retest Entries: Sometimes price retests the broken flag line before continuing