Bearish Flag Chart Pattern

The bearish flag of course is a bearish pattern, and features two components: the pole and the flag itself. What you have is a downtrend followed by a slight up trending channel. The slight move higher as simply a break from the downtrend as the market collect more sellers. The poll itself can be used to measure the potential move, as once we break below the bottom of the flag, the market should move roughly the same length as the pole.

By the time we form a bearish flag, we are well within a downtrend, so this is a continuation pattern more than anything else. We do have to break down below the bottom of the flag in order to continue though, and it should be noted that the flag itself should be no longer than one third of the length of the pole. If the flag becomes longer than that, it negates the pattern itself. Below you can see an example:

Bearish Flag formation.

Bearish Flag formation.

Looking at the chart below, you can see that we had formed a bearish flag, and then continued to go much lower. This was the beginning of a significant move lower that is still trying to work itself out, but you can definitely see how the market reacted. Once we broke down below the bottom of the flag, it signaled that the market was getting ready to continue the downward motion.

Bearish Flag in action.

Bearish Flag in action.

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