Bearish Flag Pattern
Learn to recognize and trade a bearish flag pattern through interactive charts.
What is a bearish flag pattern?
A bearish flag, also called bear flag, is a countertrend move after a sharp fall in price. You can expect the price to rise over several weeks, before resuming its downtrend.
Bearish flag duration
A flag is a short-term pattern, which tends to occur over 1 to 3 weeks, as the price consolidates. If a pattern lasts much longer, it may be invalid.
Bearish flag characteristics
This pattern looks like a flag at the end of a pole.
- The flag pattern rests on a pole, which represents a strong prior downward move in price. Remember that a flag pattern cannot occur without a pole.
- The flag consists of two parallel trendlines running in the opposite direction of the pole. In the case of a bear flag, these lines will go up, thereby retracing part of the prior fall in price.
- The flag can retrace anywhere between 38% and 50% of the pole, without invalidating the prior uptrend. These numbers are drawn from the Fibonnaci sequence.
Trading volumes generally rise as prices fall and disorderly selling takes place. You should expect volumes to remain subdued as the flag forms. Lower volumes suggest that buyers lack conviction. This lays the ground for the downtrend to resume.
Bearish flag trading
Look for the price to break below the lower trendline to confirm the bearish flag pattern before going short. The break below support should happen on rising volumes.
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