What is a Bear flag pattern?

A bear flag pattern occurs in downtrends. It is a continuation pattern, which means it signals that a give stock will continue to go down. It consists of an initial downward movement called the flag pole. This is followed by a consolidation. Followed by a breakout and continued downward movement.

In this example the stock started to fall down. Then it consolidated between $142 and $138. When it broke through it signaled that the stock would move lower. If you would have gotten in during the breakout you would have made a nice profit.

targetThe bear flag is said to have a target equal to the length of the flag pole bellow support. So the pole in this picture would be about $4. That means the target would be about $138-$4= $134. Obviously this flag pattern exceeded its target.

volume The volume for a bear flag is decreasing while the flag is forming. During the breakout you should see a surge in volume.

trading the pattern Traders may trade it just like a normal bearish breakout. Selling or doing another bearish strategy at the breakout and putting a stop just above the stocks new resistance.

Like always remember to never risk too much on any 1 trade.