Bear Flag

A bear flag is a continuation pattern in which a sharp decline — the flagpole — is followed by a weak, drifting bounce that slopes gently upward, forming the flag, before price breaks down and the sell-off resumes. It is the mirror image of a bull flag. The pattern captures a market where sellers dominate: after a heavy drop, some short sellers take profits and bargain hunters nibble, producing a feeble recovery on fading volume, but there is not enough real demand to reverse the move.

For example, suppose Ethereum falls from $3,400 to $3,000 in two days (the pole), then grinds upward between $3,000 and $3,120 for several sessions in a narrow rising channel on shrinking volume (the flag). A break below the flag's lower boundary activates the pattern, and the classical measured target subtracts the pole's height from the breakdown point — roughly $2,720 here.

The standard confirmations are declining volume during the flag and expanding volume on the breakdown. A common misconception is that every bounce in a downtrend is a bear flag; a recovery that retraces most of the drop, arrives on strong volume, or reclaims key resistance is more likely a genuine reversal, and a close above the flag's upper boundary invalidates the pattern for traders positioned short.