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Bearish flag or bear flag is a bearish chart pattern formed in a strong bearish trend indicating the continuation of the downtrend after a small pause. This is considered as a highly reliable chart pattern and often formed in strong downtrends; in fact, one can often see more than one bear flag in a strong downtrend. Bearish flag pattern resembles bearish pennant chart formation, but here the price consolidation is between two parallel trendlines forming a rectangular flag shape as against converging to form a triangular or pennant shape.


A bear flag has two parts, a pole or mast, and a flag. The pole precedes the flag and is formed when the price sharply (near vertically) declines; usually because of some negative news/report or negative fundamentals. The flag is the price consolidation phase where the price moves within a short range. The flag can be either horizontal or slightly upwards; the second one more common. The formation then breaks out to continue the existing downtrend and the price is drawn to new lows.

Trading volume tends to decline during the formation of bearish flag pattern but the breakouts are noticeable with increase in trading volume. If there is no volume drop in flag formation or no volume rise in breakout, then the reliability of the pattern is greatly challenged. In addition, if the volume increases during flag formation rather than decreases, then there is also a chance of trend reversal. Traders can go short once the breakout is confirmed and the immediate price target should be the downward length of the pole from the breakout point.

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