BEARISH FLAG PATTERN

         A flag is a chart pattern formed during a counter-trend down after a sharp fall in price movement. A bear flag pattern forms during a downtrend. It got its name because it resembles a flag on a flagpole while the price continues to move in a downtrend, attaining lower lows and lower highs.

                                                           

          A bearish pattern is a continuation pattern that represents a temporary pause before the downtrend continues. An easy way to distinguish a flag shape in the price trend is to look for a rectangular pattern formed between two parallel trendlines. The stock, commodity, or currency futures price continues to move between the two trendlines in the opposite direction before breaking out and continuing in the downtrend.

How to work?

1. The stock or Index should be potentially downtrend and then require retracement of at least 30-35% not more than 45-50%
If the stock takes a retrace of more than 50% then it is not considered a flag pattern, which means setup failed.

2. If the stock reverses after retracing 30-35%, we have to wait for a breakdown or new low, and we have to plan for short selling.

3. Look for the price to break lower with a length potentially equal to the size of the flag pole.

What should be the stop-loss & target in a bearish flag pattern?

        Trading a bearish flag pattern: Wait for the price to break down the bearish flag pattern. Downtrend line in the direction of the original Downtrend. Place an order for the sell-side & stop loss should be at the level where the flag pattern lower trend line reaches its highest point. For target Place your profit target the same distance lower the level where the Flag's higher trend line ends.