Bull Flag
A sharp rally (the pole), then a brief, mild pullback or sideways drift (the flag) — often just a pause before the move continues.
A Bull Flag is a continuation pattern, not a reversal — it shows up mid-trend, not at the end of one. First comes the pole: a fast, strong rally. Then comes the flag: a short period where price drifts sideways or gently down, giving back only a small fraction of the pole's gain, on noticeably lighter volume/momentum than the pole itself.
The read is that the flag is short-term profit-taking, not a genuine reversal of opinion — early buyers locking in gains while the broader trend (and demand) stays intact. A breakout back above the flag's own short-term high is what many traders treat as the continuation signal.
A stop is commonly placed below the flag's own low — a break below there suggests the "pause" has turned into a genuine reversal rather than a continuation setup. Because the pole already showed the stock was willing to move fast, position sizing that accounts for that same volatility continuing is a common practical consideration.
A flag that keeps drifting sideways far longer than the pole that preceded it, or one that gives back most of the pole's gain, is generally read as weakening rather than a genuine pause. Treating every pullback after a rally as automatically "just a flag," regardless of how deep or how long it runs, is the most common way this pattern gets misapplied.
- The flag should retrace only a modest portion of the pole — a pullback that gives back most or all of the pole's gain isn't a flag anymore, it's a reversal.
- A flag that drags on for a long time (weeks, not days, on a daily chart) is a weaker signal — the whole premise is a *brief* pause.
- This pattern is defined relative to the trend it's interrupting — the same sideways drift means nothing without a real pole in front of it.