The Flag is a relatively rapid formation that appears as a small channel after a steep trend, which develops in the opposite direction: after an uptrend it has a downward slope and after a downtrend, an upward slope. The preceding trend is crucial for the pattern formation and is often called a flag pole.

The question of the slope of the preceding trend is somewhat controversial: some prefer it very steep, almost vertical, while others find those with slope of 45 degrees the most desirable. The channel that develops in the Flag is relatively small, thus price action in it is almost immediate compared to other patterns: it usually takes several days to couple weeks for the Flag to be completed.

Breakouts happen in both directions but virtually all Flags are continuation patterns, which means that Flags in uptrend are expected to break out upward and those in downtrend, downward. Flag performance strongly depends on the initial price change as defined by the flag pole: those with price change more than 90% show a strong directional trend. Volume is usually heavy at the pole but declines throughout the formation.

For educational purposes only. Not a recommendation of a specific security or investment strategy.
Technical analysis is not recommended as a sole means of investment research.
Past performance of a security or strategy does not guarantee future results or success.