Bear Flag
Definition
A bear flag is a continuation pattern where price pauses in a tight, slightly upward channel after a sharp drop — it looks like a brief rest before sellers push lower again.
Example
“After breaking the morning low hard, the stock crawled back up in a tight channel for 15 minutes. The bear flag broke down on the open of the next candle with volume pouring in.”
Detailed Explanation
The anatomy of a bear flag is: a sharp, high-volume sell-off (the flagpole), followed by a low-volume, slow drift higher (the flag). That drift higher isn't bullish — it's sellers taking a breath and weak hands covering their shorts. When the consolidation resolves to the downside, the remaining shorts pile back in and new shorts join the move, creating a fast continuation lower.
What makes bear flags high-probability is the volume pattern. Volume should drop significantly during the consolidation phase. If volume stays elevated during the flag, sellers and buyers are fighting and the pattern is less clean. When you see a near-silent flag — small candles, shrinking volume, no conviction in either direction — that's when the setup has the most potential. The break below the flag low with expanding volume is the trigger.
For entries, most traders short either at the break of the flag's lower trendline or wait for a confirmed candle close below it. Stop goes above the flag's most recent high. Target is typically the flagpole length measured from the breakdown point. Bear flags fail most often when the broader market is in a strong uptrend, or when the stock's catalyst (the reason for the initial drop) starts to fade and dip-buyers step in aggressively.