What is Bearish Flag Pattern?

The Bearish Flag pattern is a bearish continuation pattern in technical analysis that signals a potential continuation of a downtrend. It is formed by a sharp downward move in price, followed by a period of consolidation in the form of a flag, which resembles a rectangle sloping against the trend. The pattern is named for its resemblance to a flag on a flagpole.

Traders typically identify the Bearish Flag pattern by drawing trendlines connecting the highs and lows of the consolidation period. The pattern is confirmed when the price breaks below the lower trendline on higher-than-average trading volume.

Traders often use the Bearish Flag pattern as a signal to sell, with a price target set based on the distance from the flagpole (the initial sharp downward move in price) to the lower trendline. It is important to note that not all Bearish Flag patterns will result in a continuation of the downtrend, and traders should use caution and consider other technical indicators and market factors before making any trading decisions based solely on this pattern.