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Ride the trend - the most reliable continuation pattern
A bear flag is a continuation pattern that occurs after a strong downward move (the "flagpole"). Price then consolidates in a tight, downward-sloping channel (the "flag") before breaking out higher to continue the original trend.
The name comes from its appearance: the sharp initial move looks like a flagpole, and the consolidation looks like a flag hanging from it. It represents a pause in an downtrend - a rest before the next leg up.
This is one of the most reliable patterns for trend traders. You're not trying to pick tops or bottoms - you're joining an existing trend at a logical entry point with a clear target.
The Bear Flag tells the story of a brief pause in panic. The flagpole forms during a sharp selloff - aggressive selling drives price down quickly, often on high volume. Shorts are profitable, longs are trapped, and fear dominates.
Then comes the flag - a shallow, upward-drifting consolidation. This isn't a reversal. It's exhausted bulls trying to buy the dip while smart money waits. The low volume during the flag reveals the truth: there's no real buying conviction behind this bounce.
The breakdown from the flag is the second wave of selling. Trapped longs who bought the dip are now cutting losses, adding to the selling pressure. The measured move target works because the same fear that drove the first leg down reasserts itself.
Standard entry on break above the flag's upper trendline. Aggressive traders enter on the flag's lower trendline with stop below...
Standard stop below the flag's lowest point. Tight stop below the flag's lower trendline for better R:R...
Measure the height of the flagpole. Add that distance to the breakdown point. Conservative target is 75% of measured move...
The Bear Flag is a high-probability continuation pattern, but its success depends heavily on the quality of the flagpole and the behavior during the flag consolidation.
The best bear flags have declining volume during the flag consolidation, then volume expansion on the breakdown.
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