A bull flag pattern is a continuation pattern and they frequently occur in stocks that are in a strong uptrend. Because the strong uptrend is almost vertical, it resembles a pole. The sideways price movement that follows has similarities to a flag, hence the name bullish flag formation.
The high tight flag becomes visible after a sharp uptrend on high volume. Afterwards, the price - as with the regular bull flag - moves into a sideways range for a short period of time. The price consolidates and the volume decreases significantly. Once the price breaks out above the flag pattern again, one can assume a continuation of the existing bullish trend.
This Bull Flag Trading guide explains how to take advantage of the pattern, both as a swing and day trader.
Medium-term trend positive
Current high within 25% of 52-week high
Only US stocks
Sufficient liquidity
Long-term price trend up
Short-term trend positive 2
Length of Flag Pole higher than 10%
Medium-term price trend up
Current close at least 30% higher than 52-week low
Pattern recognition
Solid relative strength
Short-term trend positive 1
Long-term trend bullish
Short-term price trend up
Less volume in the flag itself
Daily timeframe
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