On-chain analytics platform Arkham has published a breakdown of two widely used technical chart patterns — bull flags and bear flags — explaining how they help technical traders study trend continuation after sharp price moves and consolidation. Chart patterns are a core tool of technical analysis, the practice of studying price and volume behavior on charts to assess market conditions, and they remain a staple of crypto trading education. Bull flags follow upward moves, while bear flags follow declines, and in both cases breakouts confirm or invalidate the pattern. Arkham notes, however, that neither formation guarantees the expected breakout direction.

In its research, Arkham explains that volume, retracement depth and timeframe help traders evaluate flag formations and establish potential entry or invalidation levels. Because a breakout either confirms or negates a setup, these levels offer predefined reference points that show in advance where a flag reading would be validated or proven wrong. The platform highlighted SOLS as a bull flag example and Bitcoin's May 2022 formation as a bear flag that preceded further declines.

Bull and Bear Flags Start With Momentum

According to Arkham, a bull flag begins with a rapid price rise known as the flagpole, during which trading volume often increases. Price then enters consolidation, typically forming a horizontal box or downward-facing parallel lines. Lower volume during this phase can indicate reduced selling activity. An upside break validates the bull flag pattern, while a downside break invalidates it.

Bear flags reverse that structure. They begin with a sharp decline, followed by upward consolidation between parallel diagonal lines. A downside breakout confirms the bear flag pattern, while an upside move invalidates it. Traders therefore examine the flagpole, retracement depth and volume when assessing either formation.

Volume and Breakouts Shape Trade Setups

Arkham says traders study volume throughout a flag formation. Strong volume during the flagpole can signal increased buying or selling pressure, while heavier consolidation volume can reflect stronger activity from opposing traders. A deep retracement can also affect how traders assess a bull flag, and invalidation levels may be set based on retracement depth.

The platform adds that traders can use different entry points, and that a flag may last several candles on shorter charts or weeks on longer charts, making timeframe a factor in how the formation is interpreted.

Arkham Cites Crypto Flag Examples

As a bull flag example, Arkham highlighted SOLS following its Gate.io listing. The token surged on high volume before consolidating around $2, then broke above its flag after five lower-volume candles and continued toward $3.

Arkham also examined Bitcoin's May 2022 bear flag. Bitcoin experienced a high-volume decline before consolidating for about one month. The price briefly broke upward before returning inside the flag two days later, and a subsequent breakdown preceded another downward move and a new yearly low — an episode that unfolded during the broader crypto market downturn of 2022, when Bitcoin repeatedly fell to fresh lows for the year.

Arkham additionally distinguishes flags from pennants: pennants narrow toward a single point, while flags form horizontal or parallel-line ranges.

Source: Cryptofrontnews