The flag is another continuation pattern that is used to show uptrend price changes and impulsive corrective price actions. Flags result from price fluctuations within a narrow range and mark a consolidation before the previous move resumes. They are typically seen right after a big, quick move. The market then usually takes off again in the same direction.
A Flag (Bullish) is considered a bullish signal, indicating that the current uptrend may continue. Flags usually slope in the opposite direction of the main trend. These patterns are usually preceded by a sharp advance or decline with heavy volume. A Flag (Bearish) is considered a bearish signal, indicating that the current downtrend may continue. Flags may look like an upside-down flag post, in this case, these patterns are called reversed flag patterns. They are frequently observed in an uptrend.
Flag patterns are mostly found in a downtrend and preceded by the breakaway gaps. As mentioned above, flags are reversal continuation patterns, they indicate a slowdown in price movements. The best way to properly use flags is to wait until a triangle is broken out.
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