What is the “Bearish Flag” Price Pattern?

The Bearish Flag pattern, and how to use it

The bearish flag is a chart pattern that is formed by a downward sloping resistance level and a horizontal support level. This pattern is created when the price of an asset is held in check by a downward sloping resistance level, but the support level remains horizontal. The bearish flag is a continuation pattern, which means that it is typically seen as a bearish sign and indicates that the asset’s price is likely to continue falling.

To form a bearish flag, the asset’s price will typically make a series of lower highs and test the resistance level several times before breaking through. Once the price breaks through the resistance level, it is likely to continue falling, as traders will likely enter into short positions and push the price lower.

One of the key characteristics of the bearish flag is that the trading volume tends to decrease as the pattern progresses. This is because the downward sloping resistance level acts as a barrier, preventing the price from breaking through and causing traders to become less active. However, once the price does break through the resistance level, trading volume tends to increase as traders enter into short positions and push the price lower.

In order to trade the bearish flag pattern, traders should look for the following characteristics:

A downward sloping resistance level: This is a level at which the asset’s price has consistently struggled to break through in the past.

A horizontal support level: This is a level at which the asset’s price has consistently found support in the past.

Decreasing trading volume: As the pattern progresses and the price continues to test the resistance level, trading volume should decrease.

A breakout: Once the price breaks through the resistance level, traders should enter into short positions and expect the price to continue falling.

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It is important to note that the bearish flag is a bearish pattern, but it is not a guarantee that the asset’s price will fall. As with any trading strategy, it is important to use risk management techniques and to always be aware of the potential for losses.

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Moneta Markets is a trading name of Moneta Markets (Pty) Ltd, an authorised Financial Service Provider (“FSP”) registered and regulated by the Financial Sector Conduct Authority (“FSCA”) of South Africa under license number 47490 and located at 1 Hood Avenue, Rosebank, Johannesburg, Gauteng 2196, South Africa. Company Registration Number: 2016 / 063801 / 07. Contact Phone Number: +27 (10) 1429139. Operational Office: 31 First Avenue East, Parktown North, Gauteng, Johannesburg, 2193, South Africa.

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Mmonexia Ltd, facilitates payment services to the licensed and regulated entities within the Moneta Markets Organizational structure.

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