Bear Flag

"Bear Flags" usually occur as markets fall from a base and pause in a downtrend. They are almost identical to "Bull flags," but in the opposite direction. "Bear flags" can be easily spotted as they make "higher highs" and "higher lows" within the "flag" area. The trend lines connecting "highs" and "lows" are almost parallel. A clear breakdown confirmation is needed to trade these patterns as the price continues in the same direction prior to the "flag" formation. Like "Bull flags," "Bear flags" are also very reliable.

Trade: After a series of "higher high" tops and "higher low" bottoms, prices will breakout of the lower-trend line. Wait for confirmation of breakdown with a long range bar. One of the best confirmations occur when prices "close" below a previous "swing low" (of bear flag). Enter a "short" trade one tick below the "swing low" or previous bars' low.

Target: A typical target in "Bear flags" is from 76% to 100% of the AB range prior to the "Bear flag". The secondary targets are from 138% to 162% of the range AB.

Stop: Place a "stop" order above C to protect the "short" trade.

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