An invented price line: a sharp rise, then a short drift down in a narrow channel, then a further rise, outlined by the flagpole along the first rise and two parallel lines round the drift.
An invented chart, drawn to show the shape of a bull flag. Not market data.
Also searched asbullish flag · flag and pole · flag chart pattern · high tight flag
How to recognise a bull flag
- A steep rise first: the pole. Without it there is no flag.
- A small, orderly drift down or sideways, between two parallel lines.
- The flag is short compared with the pole, in both time and height.
- A close above the upper line of the flag.
What it is taken to mean
It is read as a pause, not a turn. After a fast rise some holders take profit and the price eases, but nobody is selling hard. If the price then leaves the flag upward, traders take it as the earlier rise carrying on.
That is a reading, and no more. A pattern is a description of what a price did, not a forecast of what it will do. Textbooks file this one under “continuation shapes”, which is a habit of naming and not a rule the market keeps.
How it is conventionally measured
The textbook measure is the length of the flagpole, set off from the point where the price left the flag. It is a convention for describing the shape, and it is not a prediction: plenty of flags are followed by much less, or by a fall.
What traders check
- How deep the flag is. A drift that gives back most of the pole is no longer a pause.
- How long it lasts. A flag that goes on and on has become a range.
- Whether the price has closed outside the flag, and on which side.
Where people go wrong
- Drawing a flag on any pullback, whether or not a sharp move came first.
- Assuming the direction. A flag can break downward, and then it was not a continuation at all.
- Treating the flagpole measure as a target.
On a real chart
Textbook shapes are rare. A real chart is ambiguous: the peaks are uneven, the lines can be drawn two or three ways, and the same candles are a bull flag to one reader and something else to another. Most shapes are also recognised only once they are finished, which is after the move they are said to announce has begun.
The picture on this page is invented. It was drawn by hand to show the shape as plainly as possible, with every awkward detail left out. It is not market data and it records nothing that happened.
Questions people ask
- What is the difference between a flag and a pennant?
- Both follow a sharp move. A flag is bounded by two parallel lines, so it looks like a small sloping rectangle. A pennant is bounded by two converging lines, so it looks like a small triangle.
- How long does a bull flag last?
- Textbooks describe it as brief: a handful of candles to a few weeks on a daily chart. There is no fixed number.
- Is a bull flag a buy signal?
- No. It describes what a price did while the shape formed. Published studies of chart patterns disagree about whether they tell anything about the next move, and the tidy examples in textbooks were chosen afterwards, when the outcome was known. It is one observation to weigh with others.
The words on this page
An explanation for study. It is not advice, a recommendation or a forecast, and a pattern described here says nothing certain about what a price will do next.