Bullish Flag

This pattern forms during an uptrend. It begins with a strong upward movement (the "flagpole"), followed by a period of consolidation that slants slightly downwards forming a "flag". The consolidation is against the trend, but it's usually a pause before the uptrend resumes. A breakout above the top of the flag is typically seen as a continuation signal.

Bearish Flag

This is the inverse of a bullish flag and forms during a downtrend. It starts with a sharp downward move (the "flagpole"), followed by a slight upward consolidation period forming the "flag". This consolidation is against the trend and usually represents a brief pause before the downtrend resumes. A breakout below the bottom of the flag is generally seen as a continuation signal.

In both patterns, the flagpole represents a strong, impulsive move, while the flag represents a pause or pullback in the price. The breakout, accompanied by an increase in volume, is a signal for traders that the original trend (bullish or bearish) is likely to resume.

Last updated