Learning to Day Trade - Part 9

Bear Flags

Bear flags are temporary bounces that occur after a stock has dropped. The bounce is then followed by another leg down. They are similar to bull flags but in reverse. $NBRV today put in a ton of bear flags but it could not be shorted at IB because there were no shares available at the time.

$NBRV 1 minute candles

To trade these you want to get short as close to the top of the flag as possible so you’re able to maximize the down side and if you need to take a loss it won’t be nearly as bad. Wait for the flag to develop a little and then short. If it’s dropping too quickly you might not get a flag but a temporary pause/pull back followed by more tanking. Basically, short into strength and cover into weakness.

Unless the stock does what $NBRV did today (basically straight down), you need to be mindful of how down the stock is already before you short. You do not want to short into a potential bottom and then get squeezed out of the position. I would consider the first two bear flags to be generally safe to short. It will differ from stock to stock though.

It can be tough to short when the stock is clearly starting to move higher which is why you need to determine when you will get out if it breaks a certain level. This can be high of day, a defined resistance level after the stock has dropped, or the high of the previous leg down.

This type of candlestick pattern is one I’m pretty good at identifying but I have yet to trade it except with paper trading. I know it’s a valid pattern because it occurs frequently on many different stocks.

Part 10 - Patience


I am not a registered financial adviser/broker/anything. Use this information for entertainment/informational purposes only. Any tickers mentioned are not recommendations to buy/sell/or sell short. They are used as examples only.