Key Takeaways

• Bull flags and bear flags are continuation patterns, not reversal patterns; they suggest the prevailing trend may resume after a brief pause.

• A bull flag usually forms after a sharp rally, followed by a small downward-sloping or sideways consolidation. A bear flag forms after a sharp drop, followed by a small upward-sloping or sideways consolidation.

• The classic flag structure has three parts: the flagpole, the flag, and the breakout or breakdown.

• Volume often expands during the flagpole, contracts during consolidation, and expands again at the breakout, making volume one of the most important confirmation tools.

• Traders usually improve outcomes by combining flag patterns with trend context, momentum confirmation, and…