Bull and bear flags are continuation patterns consisting of a sharp price move (the flagpole) followed by a brief, counter-trend consolidation channel (the flag). Bull flags slope downward after an upward pole; bear flags slope upward after a downward pole. These patterns represent a pause in strong momentum before the trend resumes, and they are among the most commonly traded continuation setups.
Flagpole: a strong, near-vertical price move on high volume. Flag: a parallel channel sloping against the trend direction. Volume contracts during the flag formation and expands on the breakout. Duration: the flag typically lasts 1-4 weeks on daily charts. Measured-move target equals the length of the flagpole added to the breakout point.
Enter on a breakout from the flag in the direction of the flagpole with volume confirmation. Aggressive entry near the lower boundary of a bull flag or upper boundary of a bear flag. The flag should retrace no more than 38.2-50% of the flagpole. Momentum indicators should remain in bullish or bearish territory during the flag consolidation.
Primary target equals the flagpole length projected from the breakout point. Place stops below the flag's low (bull flag) or above the flag's high (bear flag). Trail stops using the flag's trendline once the breakout confirms. Exit if the flag retraces beyond 61.8% of the pole, as this weakens the pattern.
15M, 1H, 4H, Daily
The strongest flags form after impulsive, high-volume moves that break through significant levels. A flag that trades sideways rather than slightly against the trend shows even greater underlying strength. Volume contraction during the flag is essential — without it, the pattern may evolve into a reversal.
Rectangle patterns form when price trades sideways between two parallel horizontal lines — a clearly defined support and resistance. Rectangles represent a period of equilibrium where buyers and sellers are evenly matched. The pattern resolves when price breaks decisively through one of the boundaries, often continuing in the direction of the prior trend.
Rising and falling wedges are converging trendline patterns where both support and resistance slope in the same direction. A rising wedge (both lines slope upward, converging) is typically bearish, while a falling wedge (both lines slope downward, converging) is typically bullish. Wedges differ from triangles because both trendlines slope in the same direction rather than converging symmetrically.
Broadening patterns, also called megaphone or expanding patterns, form when price creates progressively higher highs and lower lows, diverging rather than converging. These patterns reflect increasing volatility and disagreement between buyers and sellers, often appearing during periods of uncertainty or at major market turning points. Broadening patterns are among the most challenging formations to trade because they lack the contracting structure of typical chart patterns.
The cup and handle is a bullish continuation pattern resembling a teacup when viewed from the side. The cup forms as a rounded bottom with the left and right rims at approximately the same level, followed by a small downward-drifting consolidation (the handle). A breakout above the handle's resistance triggers the measured move, calculated from the bottom of the cup to the rim.