Bull flag

What it is

A bull flag is a continuation pattern. It starts with a flagpole — a sharp, near-vertical rally — followed by the flag: a short, tight channel that drifts sideways or slightly down. The pattern completes when price closes above the top of the flag.

Why it forms

After a fast move up, some buyers take profit and new buyers hesitate to chase. Price pauses. As long as the pullback is shallow and volume is light, it tells you sellers are not pressing — the pause is digestion, not reversal.

When price breaks the top of the channel, sidelined buyers who waited for a pullback step in, and the trend resumes.

How to identify it

• A clear, steep flagpole on strong volume.
• A flag that is short relative to the pole — usually a fraction of its duration.
• Parallel or near-parallel channel lines, sloping flat to slightly down.
• A shallow retracement. Flags typically give back well under half of the pole.
• Volume declining through the flag.

What confirms it

A candle close above the flag’s upper line, with volume increasing again. A close is more reliable than a wick poking through.

What invalidates it

• Price closes below the lower flag line.
• The pullback deepens into most of the pole — it is no longer a flag.
• The flag drags on so long that the pole’s momentum is gone.

Common mistakes

• Calling any pullback a flag. Without a genuine pole, there is nothing to continue.
• Ignoring depth. A deep, heavy-volume pullback is not the same pattern.
• Buying inside the flag. The breakout is the signal; the channel can still break down.
• Treating the pole projection as a target. It is a reference for scale only.