An invented price line: a sharp fall, then a short drift up in a narrow channel, then a further fall, outlined by the flagpole along the first fall and two parallel lines round the drift.
An invented chart, drawn to show the shape of a bear flag. Not market data.
Also searched asbearish flag · flag and pole · bear flag chart pattern
How to recognise a bear flag
- A steep fall first: the pole.
- A small, orderly drift up or sideways between two parallel lines.
- The flag is short compared with the pole.
- A close below the lower line of the flag.
What it is taken to mean
It is read as a pause in a fall. After a fast drop some sellers close and the price lifts a little, without much buying behind it. If it then leaves the flag downward, traders take it as the earlier fall carrying on.
That is a reading, and no more. A pattern is a description of what a price did, not a forecast of what it will do. Textbooks file this one under “continuation shapes”, which is a habit of naming and not a rule the market keeps.
How it is conventionally measured
The textbook measure is the length of the flagpole, set off downward from the point where the price left the flag. It is a convention and not a prediction.
What traders check
- How much of the pole the flag has given back.
- Whether the drift is orderly or has turned into a sharp recovery.
- Which side of the flag the price has closed outside.
Where people go wrong
- Calling every bounce in a falling market a bear flag.
- Assuming it must break downward. Some bounces are the start of a recovery.
- Treating the flagpole measure as a target.
On a real chart
Textbook shapes are rare. A real chart is ambiguous: the peaks are uneven, the lines can be drawn two or three ways, and the same candles are a bear flag to one reader and something else to another. Most shapes are also recognised only once they are finished, which is after the move they are said to announce has begun.
The picture on this page is invented. It was drawn by hand to show the shape as plainly as possible, with every awkward detail left out. It is not market data and it records nothing that happened.
Questions people ask
- Is a bear flag the opposite of a bull flag?
- Yes, it is the mirror image. A bull flag is a sharp rise and a small drift down; a bear flag is a sharp fall and a small drift up.
- Why does the flag slope against the move?
- Because it is a partial retracement: some of the people who profited from the sharp move close their positions, and the price gives a little back.
- Does a bear flag predict a further fall?
- No. It describes what a price did while the shape formed. Published studies of chart patterns disagree about whether they tell anything about the next move, and the tidy examples in textbooks were chosen afterwards, when the outcome was known. It is one observation to weigh with others.
The words on this page
An explanation for study. It is not advice, a recommendation or a forecast, and a pattern described here says nothing certain about what a price will do next.