What is a bull flag pattern?

Takeaway: A bull flag pattern may indicate that a stock is consolidating within a continuing uptrend. The preceding trend: This is the flagpole rise with the stock exhibiting an uptrend in a short period of time. The consolidation channel: This is the support and resistance segment where the stock fluctuates within identified levels (the flag).

Are Bull flags always followed by an uptrend?

However, bull flags are not always followed by an uptrend; sometimes prices may fall after a bull flag formation. In addition, bull flags can to be followed by a period of consolidation, during which prices may move sideways before resuming their upward trend.

What is a bull flag breakout?

A bull flag breakout is thebest way to trade the bull flag pattern. After a stock has an initial bull run, then consolidates on lower volume, you expect the initial demand to return and force a new breakout in the stock. Let's examine the AMC example above with a little more detail.

How does a bull flag formation work?

2. The breakout phase: a legitimate breakout occurs when price action breaks through the upper level of resistance. 3. The confirmation phase: the breakout is confirmed by the price closing above the upper resistance level. The bull flag formation has proven to be a reliable trade signal when found in an up trend.