Bull Flag Pattern: Guide for Technical Analysis and Trading Strategy

Bull Flag Pattern

Once large volume comes back and starts pushing the stock further down, that could be the time to short sell. Ideally, you pair this with another technical or fundamental indicator — like the first red day https://www.bigshotrading.info/ after a runup or news of an offering. A line connects the peaks of all the rally candles that form the flagpole. At the same time, the stop-loss was set below the flag pattern’s immediate low of $26,740.

The steeper the rise, the more significant the bullish trend may be. Once the pole is found, identify the range of consolidation or wavering in the price of the stock (this is the flag). Prices will likely fluctuate during this stage before they begin trending upwards, assuming the bull flag does what is expected. This is because the consolidation creates a resistance line at the higher end, while the lower end is the support line.

What does a “bull flag pattern” mean?

Lastly, when the volume returns, you’ll buy the break of the previous candle’s high. A bull flag is a bullish stock chart pattern that resembles a flag, visually. The pattern occurs in an uptrend wherein a stock pauses for a time, pulls back to some degree, and then resumes the uptrend.

They all feature strong momentum followed by a consolidation period. Smart traders know key patterns — and the bull flag pattern can be a crucial momentum indicator. Nonetheless, these indicators and chart patterns provide traders with some assurance. The bull and bear flag has been proven to be effective and is used by successful traders all over the world. Because the pattern causes price action, crypto traders immediately rush to buy or sell their holdings to profit when the flagpole appears.

Risk management

Importantly, buying power changes between market hours and… Join thousands of traders who choose a mobile-first broker for trading the markets. This is a great lesson on managing risk and respecting your stops.

  • If you can identify key levels on a chart where shorts could be underwater, then see a bull flag form, it could be indicative of a coming squeeze.
  • Our content is packed with the essential knowledge that’s needed to help you to become a successful trader.
  • If you will wait for the price to retrace and then open a buy trade after the formation of a bullish candlestick pattern, then it will increase the risk-reward ratio.
  • Only risk capital should be used for trading and only those with sufficient risk capital should consider trading.
  • Another pattern that resembles the bullish flag pattern is called a pennant.
  • You draw these around the top and bottom of the consolidation.

The only difference is the patience it takes to allow the pattern to develop. In this example you have AMC breaking out of its prior trading range on increased volume. The optimal place to buy a bull flag breakout is once the trend begins to shift once again in the desired direction. In this 30-minute chart example, you can see that the first candle to make a new Bull Flag Pattern high inside the bull flag becomes the breakout candle. If we are astute traders who understand support and resistance, we could have gauged the quality of the bull flag as a small consolidation along the way to the resistance area above. This would give us confidence, not only that the move might not be finished, but also as to where our target could be set.

How to Trade Bull Flag Patterns

However, if you trade on higher timeframes, such as H4, D1, or W1, you can get filled in days or weeks. If you do not agree with any term of provision of our Terms and Conditions, you should not use our Site, Services, Content or Information. Please be advised that your continued use of the Site, Services, Content, or Information provided shall indicate your consent and agreement to our Terms and Conditions. You’ll find trading difficult if you rely on one pattern to tell the story. That’s why it’s so important to see patterns within patterns.

  • So, the earlier you are in a bull run or momentum swing, the better your bull flag should perform.
  • No offer to buy securities can be accepted, and no part of the purchase price can be received, until an offering statement filed with the SEC has been qualified by the SEC.
  • Bull flag trading patterns are one of many patterns that traders study in the markets.
  • Pole is the preceding uptrend where the flag represents the consolidation of the uptrend.
  • This is a great lesson on managing risk and respecting your stops.

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