A sharp decline (the pole), a smaller pause angled against it (the flag), then a possible break lower: that is a bear flag chart pattern. That is how a July 17, 2025, guide from chart-tools vendor LuxAlgo defines it. The pattern does not guarantee another decline, it says. The guide and a 2018 explainer on Yahoo Finance set the price target the same way. Take the breakdown price and subtract the height of the pole.
Key facts, per LuxAlgo's guide
- Pole: The directional decline that comes before the pause.
- Flag: A small channel with roughly parallel edges, tilted against that decline.
- Breakdown: A completed candle close below the lower edge, kept apart from a brief move under it.
- Target: The pole's height subtracted from the chosen breakdown level.
- Limit: No guarantee of another decline, and no added safety for short sellers.
What the pattern looks like
The 2018 explainer on Yahoo Finance carries a page date of July 21, 2018, though its text states no date. It was retrieved on Oct. 13, 2026. It splits every flag pattern into two main parts, the pole and the flag. The pole is a strong, impulsive move up or down. A surge in trading volume backs it. The flag is the pause that follows, shaped like a falling or rising channel. A bear flag shows up in a downtrend, when price is likely to sink further, it says. LuxAlgo defines the shape more narrowly. Its classical bear flag is a small channel with roughly parallel edges. That channel tilts against the decline before it.
When a break counts, and what cancels it
LuxAlgo's guide separates two events at the flag's lower edge. One is a brief move under the line. The other is a price candle that finishes and closes below it. A flag can also be cancelled. A close above its far edge may invalidate it. So may a pullback that retraces too much of the fall. A pause that runs too long can end it as well. Each of these tests applies under rules the trader sets.
What volume can and cannot show
LuxAlgo describes a traditional volume sequence for the pattern. Selling is active during the pole. Trading quiets during the pause. Activity picks up again at the break. A volume surge cannot certify that the fall will continue, it says. A break without a surge is not automatically false either.
Working out the target
The 2018 explainer sets the target in two steps. First, pole height equals the pole high minus the pole low. Second, the bear flag target equals the breakdown price minus that height. LuxAlgo uses the same subtraction, measured from whichever breakdown level the trader selects. The formula's inputs are the pole high, the pole low and the breakdown price.
Bear flag target from three chart levels
Enter a pole high, a pole low and a breakdown price from your own chart to get the projected bear flag target. The preset levels are hypothetical, not market data.
| Pole high (top of the steep fall) | Pole low (bottom of the steep fall) | Breakdown price (close below the flag) | Projected target (arithmetic, not a forecast) |
|---|---|---|---|
| 100 | 80 | 85 | 65 |
| 50 | 40 | 42 | 32 |
| 20 | 16 | 17 | 13 |
- The preset and example levels are hypothetical, not market data.
- All three levels are your own chart readings in the same price unit.
- Pole height is the pole high minus the pole low, as the 2018 explainer on Yahoo Finance defines it.
- The target subtracts that height from the breakdown price, the rule both guides give.
- A result at or below zero is not a usable price level.
The result is arithmetic on the levels you enter, not a probability or a promise that price will reach it.
What the target does not tell you
LuxAlgo says no universal 60–70% continuation rate has been substantiated for the rules in its guide. Nor has an 8% median move. It calls the pole-based target a charting convention. The number is not a probability estimate. It is not a promise that price gets there either.
What is confirmed and what is not
Where the two guides agree and differ
- Both guides: A bear flag follows a decline. Its target is the breakdown level minus the pole height.
- 2018 explainer only: An asset usually mimics the pole after a bear flag breakdown, with no data offered.
- LuxAlgo only: The target is a charting convention. A volume surge cannot certify continuation. No substantiated universal 60–70% continuation rate or 8% median move exists for the rules in its guide.
- No source: A measured success rate, a typical move size or a tested track record for bear flags.
Short selling and the pattern
LuxAlgo says a bear flag does not make short selling safe. The U.S. Securities and Exchange Commission (SEC) runs Investor.gov, an investor education site. Its glossary defines a short sale as selling stock the seller does not own.
Analysis: a measurement, not a forecast
Both guides subtract the pole height from the breakdown level. They disagree on what the result means. The older explainer treats a move the size of the pole as the usual outcome. It offers no data for that. The newer guide calls the same projection a convention. It says no substantiated universal 60–70% continuation rate or 8% median move exists for its rules. Treating the computed number as an expected price relies on the older framing. The breakdown rule points the same way. A brief dip under the lower edge is not yet a completed close. On this reading, the pattern offers a checklist and a measurement. It does not offer odds.
Limits: neither guide reports tested results for the pattern, the 2018 explainer's text ends before its bear-flag example, and the SEC definition covers stock, not crypto.
Next step
A separate explainer covers how cross and isolated margin affect crypto liquidation risk. Another covers how crypto day trading works and what it costs.
Sources: Bear Flag Pattern: A Guide to Ride Downtrends Safely (luxalgo.com), Jul 17, 2025 · Yahoo Finance, Jul 21, 2018 · Short Sales | Investor.gov (investor.gov), accessed Oct 13, 2026
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