A Bull Flag is a continuation pattern. This pattern indicates upside momentum continuation in a stock. The pattern start with the a swift upside move on strong volume (flag pole), followed by a sideways consolidation (flag) on decreasing volume, followed by a break of consolidation support on strong volume and an upside move equal to the initial flag pole.
This pattern is very common in day trading systems, and can also be utilized in a swing trading, options trading, and futures trading system.
Take a look at this Bull Flag:
This bull flag took place in the middle of a strong upside momentum rally. Notice the quick spike to the upside on strong volume. Next you saw some sideways trending on decreasing volume. After that, a nice upside breakout with strong volume backing the move.
The move is measured by the height of the initial flag pole. In this example, the flag pole started at 112.50 and ended at 117.50, giving it a height of 5. Add 5 to the resistance break level of 117.50, and you get a target of 122.50. As you can see, the stock completed the measured move.
Related terms: Bull Pennant, Bear Flag, Bear Pennant
See also: Neutral Sentiment, Consolidation, Head & Shoulders, Inverse Head & Shoulders