Chart patterns and candlestick setups
Does the bull flag pattern work?
Rejected Pre-registered and tested, August 2026
The pole is the only live part of the pattern. Every flag condition made the result worse.
What the pattern claims
A bull flag is two moves. First the pole: a sharp, fast rise on heavy volume. Then the flag: a shallow drift sideways or slightly down, on lighter volume, staying tight and holding most of the gain. The claim is that the flag is a pause for breath rather than a reversal, and that the next move continues the pole.
How we tested it
3,550 occurrences across 1,363 companies in the S&P 500, 400 and 600, from 2006 to 2026. This was the best-powered test this family of patterns has ever had, which is why the result is worth something rather than being another shrug.
Every study here was pre-registered: the exact rule, the pass and fail thresholds and the data window were written down and cryptographically fingerprinted before the test was run. That makes it impossible to move the goalposts after seeing the answer.
Results assume you buy at the next morning's open, not at the closing price that triggered the signal, and they include companies that were later delisted or went bust. Returns are measured against what the rest of the market did on the same days, so a rule that made money only because it fired on days everything rose scores zero here.
What happened
Sixty trading days after the signal, the average bull flag returned 0.08 percentage points below what a typical stock did over the same days. The median case was 1.36 percentage points behind. Both are indistinguishable from zero, and the comparison group sat at zero too.
The pattern did not lose money in any dramatic way. It simply did not do anything.
What it means
The interesting part is which half was carrying the result. We removed each flag condition in turn — the shallow drift, the holding of the gain, the tightness — and every single removal improved the outcome. Buying the top of the pole with no flag requirement at all beat waiting for the full pattern.
So the flag is not a filter that adds information. It is dead weight. The sharp rise is the only part of a bull flag doing any work, and the geometry the pattern is named for subtracts from it.
One more thing worth knowing if you use flags: the direction of volume during the consolidation is noise. We have now measured it in three separate studies. Rising volume won in one, falling volume won in another, and no result came close to statistical significance. Any rule leaning on whether volume dries up during a flag is fitting randomness.
A rejection is not "this never works"
It means: tested on this universe, over this period, against a bar written down in advance, it did not clear the bar. Where a test lacked the power to decide either way we record it as undecided rather than rejected. The full research ledger has all 192 experiments and what the failures have in common.
Other patterns we tested
- Does MACD divergence work? The loose version changed the outcome by less than one hundredth of a percent. The strict version widened both tails.
- Does breakout and retest work? The setups the rule throws away outperformed the ones it keeps.
- Does buying the dip after a spike work? The first pattern in this family to lose money significantly rather than merely do nothing.
- Does a big RSI drop mark a buying opportunity? The family's only statistically significant result, and it vanished completely once we accounted for when it fired.
- Do three shrinking red candles signal a bottom? The only chart pattern that beat all its own control groups — and it still could not clear the error bars.
- Does a tight base after a sharp drop work? Removing the base conditions improved the result. The base was the problem.