Here are the key differences between bullish and bearish flag patterns:
1. Trend Direction & Formation Context
- Bullish Flag:
- Occurs in uptrends after a strong upward price surge (flagpole).
- Consolidation phase slopes downward or sideways against the uptrend.
- Bearish Flag:
- Occurs in downtrends after a sharp price decline (flagpole).
- Consolidation phase slopes upward or sideways against the downtrend.
2. Volume Behavior
- Bullish Flag:
- Volume spikes during the initial uptrend (flagpole).
- Volume declines during consolidation, then rises again on breakout.
- Bearish Flag:
- Volume surges during the initial downtrend (flagpole).
- Volume drops during consolidation, then increases on downward breakout.
3. Breakout Direction
- Bullish Flag:
- Breakout upward from consolidation, confirming trend continuation.
- Price target: Flagpole height projected upward from breakout point.
- Bearish Flag:
- Breakout downward from consolidation, resuming the downtrend.
- Price target: Flagpole height projected downward from breakdown point.
4. Entry & Risk Management
- Bullish Flag:
- Entry: Buy when price breaks above upper flag boundary.
- Stop-loss: Below the consolidation’s lowest point.
- Bearish Flag:
- Entry: Short when price breaks below lower flag boundary.
- Stop-loss: Above the consolidation’s highest point.
5. Market Psychology
- Bullish Flag:
- Reflects temporary profit-taking before buyers regain control.
- Bearish Flag:
- Indicates short-covering rallies before sellers dominate again.
Comparison Table
| Feature | Bullish Flag | Bearish Flag |
|---|---|---|
| Trend | Uptrend continuation | Downtrend continuation |
| Flag Slope | Downward/sideways consolidation | Upward/sideways consolidation |
| Breakout | Upward | Downward |
| Volume | High on pole, low in flag, high breakout | High on pole, low in flag, high breakout |
| Profit Target | Flagpole height added upward | Flagpole height subtracted downward |