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Flag Chart Pattern

Flag chart pattern

The Flag Pattern is a widely recognized continuation pattern seen on price charts, indicating that the market is taking a short break before moving in the same direction as before. The pattern gets its name because it looks like a flag on a pole — a sharp and decisive price movement followed by a brief consolidation where the price trades within a narrow range, often forming a rectangle or parallelogram shape.

This pattern commonly appears after a strong uptrend or downtrend. The initial sharp move, called the pole, reflects significant buying or selling pressure. After this burst of activity, the market enters a pause phase, known as the flag, where buyers and sellers temporarily balance each other out. Once the consolidation ends, the trend often resumes in the same direction, allowing traders to capitalize on the next wave of momentum.


Structure of a Flag Pattern

  • Flagpole: The pole represents a rapid price movement, indicating strong market sentiment and commitment from buyers or sellers
  • Flag: The flag shows a period of indecision where price action slows down, typically moving sideways or slightly counter to the main trend
  • Breakout: After the consolidation, price breaks out, usually with increasing volume, signaling that the trend is ready to continue.

Example: Transrail daily timeframe chart


This chart of Transrail Lighting Ltd is a clear example of a bullish Flag Pattern, and we can walk through the price movements to understand how it forms and how traders can use it.

Step 1 – Pole Formation (Strong Uptrend)

  • The price starts near ₹480 and moves sharply upward over a period of a few days.

  • It reaches around ₹690-700, forming a pole.

  • This represents a nearly ₹200 increase in price within a short period, showing strong buying pressure and bullish sentiment.

Step 2 – Flag Formation (Consolidation)

  • After reaching ₹690, the price enters a consolidation phase.

  • The price drifts slightly downward and trades between approximately ₹600 and ₹690.

  • The candlesticks show indecision — buyers and sellers are in a temporary standoff as traders take profits and others wait for confirmation.

  • This consolidation phase forms the flag, with trendlines slightly sloping downward.

Step 3 – Breakout (Trend Continuation)

  • The price breaks above ₹690 with increased volume.

  • After breaking out, it continues the upward trend and reaches around ₹800 or higher, showing that the bullish momentum has resumed.

  • The breakout confirms that buyers are back in control and the trend will likely continue.

Example 2 - BITCOIN Crypto weekly chart


Bitcoin’s weekly chart is a perfect example of bullish flag patterns. After every strong rally, the price consolidates in a downward channel forming a flag, and then breaks out to continue the uptrend. Multiple flag formations can be seen, each leading to higher price levels. This shows how flags act as trend continuation patterns during strong bullish momentum

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