A Bear Flag is a technical pattern that usually occurs during a downtrend in the financial market. It represents a short-term reflection or pause in the downward movement of the price before the trend continues. The name "bear flag" comes from the analogy with the flag, where the flag bayonet is vertically pointing down.
Bear Flag Features:1. Trend: A bearish flag is formed during a downtrend when prices are under constant downward pressure.
2. Flag Bayonet: A flag bayonet is a short-term upward price movement after a downward movement. This creates a triangular or parallelogram shape with a downward slope.
3. Volumes: Trading volumes usually decrease during the formation of a bear flag and increase when it breaks. A low volume indicates that traders are showing less interest in the market.
4. Continuation of the trend: When the bearish flag reaches its completion, the continuation of the downtrend is expected. The trader's goal may be to make a short sale after breaking the bear flag in order to capitalize on the ongoing price decline.
Application of the bear flag:A bearish flag can be used by traders as a signal to open a short position or set a stop loss.
Traders can wait for the bearish flag to break down and enter into a sell deal to take advantage of a possible further price decline.
