What is a flag breakout pattern?

- Quora Answer (1 of 2): In the context of technical analysis, a flag is a price pattern that, in a shorter time frame, moves counter to the prevailing price trend observed in a longer time frame on a price chart. It is named because of the way it reminds the viewer of a flag on a flagpole.

What is a flag pattern in technical analysis?

A flag pattern, in technical analysis, is a price chart characterized by a sharp countertrend (the flag) succeeding a short-lived trend (the flag pole). Flag patterns are accompanied by representative volume indicators as well as price action. Flag patterns signify trend reversals or breakouts after a period of consolidation.

What does a flag pattern look like?

The pattern got its name “Flag,” as its structure looks similar to the Flag on a flagpole. Flag patterns can be either upward trending (bullish flag) or downward trending (bearish flag). The bottom of the flag should not exceed the midpoint of the flagpole that preceded it.

What happens if you break a flag?

The breakout from a flag often results in a powerful move higher, measuring the length of the prior flag pole. It is important to note that these patterns work the same in reverse and are known as bear flags and pennants. Bull flags typically begin to surface in conjunction with a new market rally.