Bear flag

What it is

A bear flag is the mirror of the bull flag. A flagpole — a steep, fast decline — is followed by a flag: a short, tight channel drifting sideways or slightly up. The pattern completes when price closes below the flag’s lower line.

Why it forms

After a sharp drop, short sellers take profit and bargain hunters buy, so price bounces. If that bounce is shallow and comes on light volume, it shows buyers lack conviction. Sellers are simply pausing.

When price breaks the bottom of the channel, the bargain hunters from the bounce are trapped, and the decline resumes with their selling added.

How to identify it

• A clear, steep decline on strong volume.
• A short flag relative to the pole.
• Parallel or near-parallel lines, flat to slightly rising.
• A shallow bounce that recovers only a small part of the drop.
• Volume fading during the flag.

What confirms it

A candle close below the lower flag line, ideally with volume picking up again.

What invalidates it

• Price closes above the upper flag line.
• The bounce recovers most of the flagpole.
• The flag drags on until the original momentum is gone.

Common mistakes

• Seeing a flag in every bounce. It needs a genuine, sharp pole first.
• Ignoring volume. A bounce on heavy, rising volume is not a weak bounce.
• Acting inside the channel. The flag can resolve either way until it breaks.
• Treating the projection as a forecast. It is a reference for scale.