A flag pattern is a short-term continuation chart pattern that forms after a sharp, near-vertical price move (the flagpole) — characterised by a brief consolidation period where the price trades in a narrow, slightly counter-trend channel (the flag) before resuming the original trend direction with renewed momentum. The pattern resembles a flag on a pole: the flagpole is the initial explosive price move (representing a strong surge of buying or selling momentum), and the flag is the subsequent period of controlled consolidation where early participants take partial profits and the market absorbs the initial move before the next leg. A bullish flag forms after a strong upward move — with the flag drifting slightly lower or sideways before breaking out upward. A bearish flag forms after a sharp decline — consolidating with a slight upward drift before breaking down. The breakout from the flag is confirmed by a volume surge above the flag's upper boundary (bullish) or lower boundary (bearish). The measured price target after the breakout is estimated by adding (or subtracting for bearish flags) the length of the flagpole from the breakout point. In Indian equity and F&O markets, flag patterns are among the most reliable continuation setups — particularly in strongly trending Nifty 50, Bank Nifty, and large-cap stocks during sector-led bull runs, where flags provide low-risk, high-reward entry points for traders looking to add to positions in the direction of the primary trend.
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