Bullish Flag

The Bullish Flag strategy, also known as the Pole Pattern or Rectangle Pattern strategy, is a trend continuation pattern.

Viewed as a universal pattern which appears in the price action of all markets on almost any time frame (1-minute to monthly charts), the Bullish Flag is named after its visual representation of a flag on a flagpole.

Used by momentum traders, the Bullish Flag is found in strongly up trending markets whereby the ‘flagpole’ is the product of a near vertical rise in price followed by the ‘flag’ resulting from a period of consolidation (often found in after-hours or pre-market trading).

The price action representing the flag may be horizontal rectangle or a gentle downward sloping price channel. Traders of this strategy should note that is the retracement of the flag should be less than 38-percent.

Bullish Flag traders should only trade in the direction of the prevailing trend, using the points of both the flagpole and flag as entry points and target price levels.

Depending on the trader, a Bullish Flag BUY signal may be identified at either (a) the break of the flag to the upside, or (b) the break of the high of the flagpole.

The price target of a Bullish Flag strategy is identified by measuring the length of the prior flag pole and entering a SELL trade at this price level.
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