Bear Flag Chart Patterns
A bear flag pattern is constructed by a descending trend or bearish trend, followed by a pause in the trend line or consolidation zone.
The strong down move is also called the flagpole while the consolidation is also known as the flag
The bear flag pattern comes after a strong move downwards. The stronger the move, the bigger the profit potential is.
As you can see in the figure below, after the market made a strong down move, it enters into consolidation – a very narrow range – to adjust to the new lower prices.
(The Psychology behind Bear Flag Pattern)
The bear flag pattern highlights a trading environment where the supply and demand balance has shifted badly in one direction of the market (supply > demand). In turn, this will produce very little upside retracement, which allows the flag structure to take shape After the initial selloff, people who missed the train will panic and begin selling. More people will sell it during the flagpole stage.
During the pause or the narrow consolidation, people wait to get a higher price so they can sell. But since the supply and demand equation is so imbalanced, this won’t happen. We get another smash that will make many people chase the move to the downside again.
A bear flag pattern is constructed by a descending trend or bearish trend, followed by a pause in the trend line or consolidation zone.
The strong down move is also called the flagpole while the consolidation is also known as the flag
The bear flag pattern comes after a strong move downwards. The stronger the move, the bigger the profit potential is.
As you can see in the figure below, after the market made a strong down move, it enters into consolidation – a very narrow range – to adjust to the new lower prices.
(The Psychology behind Bear Flag Pattern)
The bear flag pattern highlights a trading environment where the supply and demand balance has shifted badly in one direction of the market (supply > demand). In turn, this will produce very little upside retracement, which allows the flag structure to take shape After the initial selloff, people who missed the train will panic and begin selling. More people will sell it during the flagpole stage.
During the pause or the narrow consolidation, people wait to get a higher price so they can sell. But since the supply and demand equation is so imbalanced, this won’t happen. We get another smash that will make many people chase the move to the downside again.