Flag Pattern

In the middle of a sharply trending, suddenly the price layover in the opposite direction within a flag pattern. The flag pattern has distinguished features, like being short, sharp, and narrow! Considering the previous trend as a pole of flag, its name and shape become more related. Its shortness refers to the time duration of price swing, sharpness is the sign of growing slope and being narrow is related to the distance of bilateral bounds. From the trading point of view, the flag is low risk with high-profit patterns, and finding them earlier can make more money. Assume it is the landing part of stair. Price loosens its trend for a while and that's the time for ambush traders to take an action. Flag pattern has also members:

Bearish Flag (Falling Flag): Like its name, this type of flag has a down-growing shape and prices fluctuate in a decreasing direction.
Bullish Flag (Rising Flag): At the first sight, this flag shows an increasing direction of total price fluctuations.

Nonetheless, they are two different types of the flag but also have similar features from the technical analysis points of view. Some aspects are discussed in the following.

1. Appearance: Two-short parallel trendlines are often the sign of a flag pattern. No more consider a flag pattern, If they tend to slop toward each other. The previous trend trendline is also considered as a pole of a flag, especially when it's long and sloped.

2. Trendline: Depending on the type of flag:

In a rising flag (Bullish Flag), the upper trendline connects higher highs and the lower one goes through higher low points.
In a falling flag (Bearish Flag), the upper trendline connects lower highs and the lower one goes through lower low points.

3. Pattern Category: Like triangles, it is a member of continuous family patterns.
4. Breakout Direction:

Expectation: Can be in any direction. The price tends to exit the flag by following the prior trend. When it was bullish, the price may leave in a bullish trend, and in a bearish trend, the price continues the bearish trend. To discuss it clearly, price target is also estimated within two categories:
Bullish Flag: Considering an upper price target level seems logical when the price tends to grow. Before entering the pattern, the next price target is set by adding to the breakout price as long as the height of the flag pole.
Bearish Flag: To stay with downtrend, price may fall lower than the flag, approximately as long as the height of flag pole.
Failure: Whenever the flag pattern shows a reversal, technical analysis knowledge on the paper assumes it as a failure. But traders not!