Bitcoin’s price chart is displaying a well-formed “bull flag,” hinting at a potential breakout to new all-time highs that align with the expectations of some traders predicting a price rally to $140,000 and beyond.

Having surged to a record high of nearly $111,900 from around $74,700 in the six and a half weeks leading up to May 22, Bitcoin has since been trading in a slightly descending range, forming the bull flag as reported by charting platform TradingView. This flag is characterized by trendlines connecting the highs on May 22 and June 9, as well as the lows on June 5 and June 22. The initial surge represents the pole.

Confirmation of the bull breakout would require a move above $109,000, paving the way for a rally to $146,000. This target level is calculated by adding the length of the pole to the breakout point, following a method known as a measured move utilized by technical analysts.

A bull flag pattern signifies a low-volume consolidation within a narrow range against the trend, preceded by a sharp uptrend. This consolidation phase is usually of shorter duration and smaller magnitude compared to the preceding rally, helping to alleviate short-term overbought conditions and prepare for the next leg higher.

Flag formations usually occur over a short period, ranging from a few days to a few weeks, with declining volume throughout the consolidation phase, as mentioned by Charles D. Kirkpatrick in his book on Technical Analysis. It is crucial to exercise caution and wait for a confirmed breakout before taking any actions, as noted by Kirkpatrick.

Flags typically indicate continuation patterns, where the consolidation is expected to resolve in the direction of the preceding uptrend. However, failures can happen in two ways – prices falling out of the flag, signaling a bearish reversal, or a failed bullish breakout, requiring continuous monitoring of price actions.

Despite the possibility of failures, the failure rates for flag patterns are generally low, with minimal pullbacks or throwbacks, short time periods, and steep trends before and after their occurrences, making them favorable trading patterns according to Kirkpatrick.