Definition
Flag Pattern
A flag is a short continuation pattern where price consolidates in a small channel after a sharp move, before resuming it.
After a strong up or down move (the flagpole), price drifts sideways or slightly against the trend in a narrow, rectangular channel — the flag — as the market pauses. A breakout in the direction of the original move signals continuation, with a target often equal to the flagpole's length.
Indian traders spot bullish and bearish flags on Nifty, Bank Nifty, and momentum stocks during strong trends, using the breakout as a low-risk continuation entry. The pennant is a similar pattern with converging trendlines instead of a parallel channel.
Related terms
- Triangle PatternA triangle is a consolidation pattern of converging trendlines — ascending, descending, or symmetrical — that precedes a breakout.
- Cup and HandleCup and handle is a bullish continuation pattern shaped like a rounded bottom (cup) followed by a small pullback (handle).
- BreakoutA breakout is when price moves decisively beyond a defined support, resistance, or pattern boundary, often starting a new move.
- TrendlineA trendline is a straight line connecting a series of highs or lows to visualise the direction and slope of a trend.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.