What it looks like
The pole is a fast, strong fall. The flag is a short rest of several candles that drift slightly up or sideways in a narrow channel, recovering only a small part of the pole. The pattern completes when a candle closes below the bottom of the flag.
What it means
A sharp fall, then a short rest that barely recovered anything. A bounce that weak says sellers are still there and buyers have little appetite. When price closes back below the rest, the next leg down has begun.
How to trade it
- 1
Measure the pole and mark the top and bottom of the flag.
- 2
Confirmation: a candle closes below the bottom of the flag.
- 3
Entry: sell at that close.
- 4
Stop: above the high of the flag. Example on US30: pole from 47,200 to 46,900 (300 points), flag up to 46,980, close below at 46,910. Sell at 46,910, stop at 46,995, an 85 point risk.
- 5
Target: the pole length from the break, about 46,610.
A close back inside the flag after the breakdown candle has closed.
Where it works best
In falling markets on 5 minute to 1 hour charts, especially after a news driven drop on an index.
WickSpeak finds bear flags automatically and labels them on the candles that made them. Each note gives what the flag is, how to trade it and that a close back inside the rest proves it wrong. In Playbook you can use it as a condition in a play, alone or alongside other patterns and indicators (any of the 146 patterns can be a condition), and backtest it on past candles with your own costs.
Common mistakes
- Selling a flag that recovers most of the pole.
- Selling inside the flag before the break.
- Fighting a larger uptrend where the drop is only a pullback.
Related patterns
Questions traders ask
Is a bear flag bearish?
Yes. It is a bearish continuation pattern: a short rest inside a fall, followed by a break lower.
Where is the stop on a bear flag?
Above the high of the flag. A close back inside the flag already proves the break wrong.
What is the bear flag target?
The usual target is the length of the pole, measured down from the breakdown point.
How can I tell a bear flag from a reversal?
A bear flag recovers only a small part of the drop and drifts in a narrow channel. A bounce that recovers more than half the fall is not a flag.