Flag pattern
A flag pattern is a brief, rectangular pullback that forms against the direction of a strong preceding price move, resembling a small flag on a pole when drawn on a chart, where the pole is the sharp initial move and the flag is the short consolidation, sideways or running counter to the trend, that follows. A bull flag forms after a sharp rally and drifts slightly down or sideways, while a bear flag forms after a sharp decline and drifts slightly up or sideways.
The pattern is classified as a continuation pattern, meaning it typically resolves in the same direction as the move that came before it rather than reversing that trend. The logic is that after a fast, aggressive move, some traders take profits and others hesitate, causing a short pause, but the underlying buying or selling pressure that drove the initial move has not disappeared and tends to reassert itself once the pause ends. Volume typically shrinks during the flag itself and picks back up once price breaks out of it in the original direction.
Because flags are meant to be brief, they are usually expected to resolve within a couple of weeks at most, a sideways consolidation that drags on much longer starts to look more like a broader than a flag. Traders often project a for the resumed move by measuring the length of the pole, the initial sharp move, and adding that same distance from the point where price breaks out of the flag, a version of the technique used across several continuation patterns.