Bull flag

Traders spot a bull flag on a candlestick chart by its shape: a steep, near-vertical rally called the "flagpole," followed by a tight, slightly downward-sloping or sideways channel that resembles a small flag on a pole. It is a continuation pattern rather than a reversal signal, so it typically appears partway through an uptrend instead of at its start.

The flagpole forms on strong buying volume as price surges quickly. During the flag itself, volume usually fades as short-term holders lock in profit and the market pauses, with price drifting no more than roughly 50% back into the flagpole. A breakout above the flag's upper trendline, ideally on renewed volume, confirms that the original uptrend is resuming. The measured price target is often the flagpole's height projected upward from the breakout point.

Traders use the pattern to plan entries, stop-losses below the flag's lower boundary, and profit targets, though bull flags are not infallible. A deep retracement into the flag, or a breakdown instead of a breakout, invalidates the setup. The opposite formation, a bear flag, plays out the same way inside a downtrend.

Bull flags appear on timeframes ranging from one-minute charts to weekly ones, though higher-timeframe flags tend to be more reliable. Bitcoin's climb from around $20,000 in December 2020 to new highs by February 2021 is a frequently cited real-world example: a sharp flagpole, a brief consolidation, and a volume-backed breakout that preceded further gains, illustrating why traders watch this pattern closely during strong crypto uptrends.