Bear flag BEARISH

What a bear flag is

A bear flag is the mirror image of a bull flag: a steep decline (the pole), followed by a feeble, upward-drifting bounce in a narrow channel (the flag), completed when price breaks below the flag's lower boundary and continues the decline.

The psychology behind it

The pole is capitulation or aggressive distribution. The flag is the market's attempt to bounce — and the crucial detail is how unconvincing that bounce is. Volume dries up, the recovery is shallow, and price grinds rather than surges. Dip buyers are present but timid; trapped longs use the bounce to exit rather than add. When the flag's floor gives way, those remaining longs sell into weakness and short sellers press, extending the move.

How MKTDATA detects it

The engine matches the normalised price path against a template of a sharp fall followed by a shallow rising channel, scoring shape similarity, trendline correlation, and volume behaviour. Direction-aware momentum checks (RSI and MACD) require the indicators to agree with the bearish read — a "bear flag" printing strongly bullish momentum is penalised. Partial-completion matching surfaces flags before the breakdown.

Trading notes

The flag's lower boundary is the conventional trigger, the flag's high the invalidation. The measured move projects the pole's depth from the breakdown. Bear flags in strong uptrends fail more often than they work — context matters, and a "bear flag" that is actually a healthy pullback in an uptrend is the classic trap. Short-side patterns also face structural headwinds: rallies squeeze harder than declines drift, so risk management around the invalidation level matters more, not less.