What is Bullish Flag Pattern?What is a Bullish Flag Pattern?
The bullish Flag pattern is usually found in assets with a strong uptrend. It is called a flag pattern because it resembles a flag and pole. Pole is the preceding uptrend where the flag represents the consolidation of the uptrend.
How does Bullish Flag Pattern?
The flag pattern resembles a parallelogram or rectangle marked by two parallel trendlines that tend to slope against the preceding trend.
Phase 1: Preceding Uptrend
When there is an extreme demand in prices there is an uptrend. It continued as the demand increases.
Phase 2: Flag
After the sharp uptrend when supply increases more then the demand prices move to the consolidation phase or flag phase. This acts as a small price channel.
Phase 3: Uptrend Continuation
As the flag is a pause in an uptrend, as prices consolidate investors again start to show interest in the asset which eventually leads to heavy demand again which further leads to a breakout and uptrend continuation.
Role of Volume:
Volume plays a vital role in the completion of the Bullish Flag pattern. When in a preceding uptrend the volume is quite higher. In the flag phase, the volume starts to go down as investors are least interested to buy and sell that particular asset. And again on the breakout, the volume surges. Volume with Breakout gives a good indication of a successful uptrend.
Above Chart Explanation:
This is 4H chart of SOLUSDT We can see a good preceding uptrend with great volumes. Then after the uptrend, we enter the second phase the flag phase we can see perfect bounce and retracement from upper and lower trendlines or flag with diminishing volumes. And again a breakout with good volumes.
Here could be the two possible entries one at the bottom of the flag that gives us a very low-risk entry if it breaks the flag we exit.
And second entry can be at breakout, first, we have to confirm that the breakout is legit for that we can look at the volumes rising volumes to confirm that the breakout is legit.
Usually, we should target the length of the pole after the breakout.
Conclusion:
Bullish Flag is a continuation pattern it occurs quite often on charts and is one of the most reliable continuation patterns.
Comment your thoughts on Bullish Flag Pattern in the comment section below.
Disclaimer:
This is just an educational post never trade just any pattern. And please do your research before making any trades.
PS: We are again publishing this for our Indian Audience
Happy Trading!
