A bear flag is a technical pattern that provides an extension/continuation to an existing downward trend. The bear flag formation is underlined from an initial strong directional move down, followed by a consolidation channel in an upwards direction (see image below). The strong move down is known as the ‘flagpole’ whilst the consolidation is referred to as the ‘flag’ itself.
Bear flag formation summary
Preceding downtrend (flag pole) Identify upward sloping consolidation (bear flag) If the retracement becomes higher than 50%, it may not be a flag pattern. Ideally, we’ll see the retracement be less than 38% Enter at top of the flag or on a breakout below the low of the lower channel Look for prices to break lower with a length equal to the size of the flag pole