Bull flag BULLISH

What a bull flag is

A bull flag is a continuation pattern. It begins with a sharp, near-vertical rally — the flagpole — followed by a brief, orderly pullback that drifts gently lower or sideways in a tight channel: the flag. The pattern completes when price breaks above the flag's upper boundary and resumes the direction of the pole.

The key word is orderly. A genuine flag retraces only a modest portion of the pole (classically less than half) on declining volume. A deep, violent pullback isn't a flag — it's the start of a reversal.

The psychology behind it

The pole is driven by aggressive buying — news, a level breaking, momentum traders piling in. The flag is what happens next: early buyers take partial profits, short-term traders fade the move, and price drifts against the trend while sellers fail to gain real traction. That failure is the information. If supply were genuinely heavy, the pullback would accelerate; instead it stalls, coiling just below the highs. When the coil breaks upward, the sellers who leaned against the move are forced to cover, adding fuel.

How MKTDATA detects it

The scanner normalises each stock's last 20 five-minute candles to a 0–100 scale and measures the path against an idealised flag: a steep rise to the top of the range, then a shallow declining channel. Shape variance and Dynamic Time Warping handle stocks that trace the pattern slightly faster or slower than the textbook. Volume expansion into the breakout zone adds confirmation weight, and the pattern is also matched at partial completion — so a stock still inside the flag can surface as Forming or Near breakout before the move, not after it.

Trading notes

Flag traders typically treat the flag's upper boundary as the trigger and the flag's low as the invalidation level. The classic measured-move target projects the pole's height from the breakout point. The pattern's main failure mode is the late flag: after an extended run, what looks like the third or fourth consecutive flag often marks exhaustion rather than continuation. Volume behaviour — quiet in the flag, expanding on the break — is the traditional filter separating real flags from drift.