· A bull flag chart pattern occurs after an uptrend out of a previous price base.
· The ‘pole’ is represented by the previous uptrend in price before a consolidation.
· The ‘flag’ is a rectangular descending price range when the uptrend to new higher prices stops.
· The signal of the end of the flag pattern and the beginning of a new potential up trend is when the descending upper trend line is broken with a move upwards in price.
· This pattern is thought to be the consolidation of the uptrend.
· Traditionally the move out of the flag is thought to be potentially as big in magnitude as the uptrend before the flag begins.
· A breakout of the flag with higher than normal volume increased the chance of a continuation of the uptrend.
· A stop loss can be set at the lower trend line in the flag.
A bull flag is a powerful bullish chart pattern that is found during strong bull markets. Many times these patterns are formed in leading growth stocks that have gone parabolic.