Illustration only. Every example below shows how to structure an argument. None is a market view or a recommendation to trade any instrument, and none takes a side.
What a bull case and a bear case are
A bull case is the argument for why an asset should rise. A bear case is the argument for why it should fall. Analysts often add a base case — the outcome they consider most likely — so that the bull and bear cases act as the optimistic and pessimistic ends of a range.
For a trader, the point isn't to produce three scenarios for a report. It's to make sure that before you take one side, you've honestly built the other. The most useful bear case is the one that would make you close a long.
What a good case contains
Whichever side you're writing, a case that's worth reading has the same five parts:
- The claim — direction, asset and timeframe in one sentence.
- The drivers — the two or three forces that would cause the move, and the causal chain from each to the price.
- The evidence — sourced facts that support each driver, clearly separated from assumptions.
- The catalyst — what forces the market to reprice, and roughly when.
- The invalidation — what would prove this side wrong. See how to set an invalidation point.
A bear case that is just a list of risks ("competition, regulation, macro") is missing four of the five. Risks are ingredients; a case is an argument.
Example 1: a subscription software company after a sell-off
A hypothetical mid-sized software company sells subscriptions to businesses. Its shares have fallen sharply after a quarter in which revenue growth slowed and guidance was cut.
| Bull case | Bear case | |
|---|---|---|
| Claim | The sell-off overshot; the shares re-rate higher over twelve months. | The slowdown is structural; the shares keep de-rating over twelve months. |
| Drivers | Customer retention is still high, so slower growth is about fewer new deals, not churn. Margins expand as sales spending falls. | New deals are slowing because a cheaper competitor is winning them. Retention is a lagging indicator and will follow. |
| Evidence | Net revenue retention and gross margin in the latest filing; management commentary on pipeline. | Win/loss commentary on the earnings call; competitor growth rates; pricing changes. |
| Catalyst | Next two quarterly reports showing stable retention and rising margins. | A second guidance cut, or retention slipping in the next filing. |
| Invalidation | Retention falls two quarters in a row. | New-deal growth re-accelerates without price cuts. |
The deciding variable: whether slower growth is a sales-cycle problem or a product problem. Both sides are reading the same numbers; they disagree about cause. That's the question to go and answer — call transcripts, customer reviews, competitor disclosures — before choosing a side.
What both sides tend to miss: stock-based compensation and dilution. A margin story that ignores share count growth can be right about the business and wrong about the stock.
Example 2: gold
| Bull case | Bear case | |
|---|---|---|
| Claim | Gold rises over the next six months. | Gold falls over the next six months. |
| Drivers | Real yields fall as central banks ease; official-sector buying continues; demand for a hedge against geopolitical and fiscal risk. | Real yields stay high because inflation proves sticky; the dollar strengthens; hedging demand fades as risks ease. |
| Evidence | Inflation-linked bond yields; central bank reserve data; ETF holdings. | Rate futures versus central bank guidance; dollar trend; futures positioning. |
| Catalyst | A clear easing signal from a major central bank. | Inflation data forcing rate cuts to be priced out. |
| Invalidation | Real yields rise while gold also falls — the hedge bid isn't there. | Gold rises despite rising real yields — official buying is overriding rates. |
The deciding variable: whether the traditional link between gold and real yields still holds, or whether official-sector buying has weakened it. Each side's invalidation is the other side's evidence — that's a sign the cases are well built.
What both sides tend to miss: positioning. If speculators are already heavily long in futures, even a correct bull case can suffer a sharp pullback, and a bear case can be right for the wrong reason.
Example 3: long-dated US Treasuries
| Bull case (yields fall) | Bear case (yields rise) | |
|---|---|---|
| Claim | Ten-year yields fall over the next quarter. | Ten-year yields rise over the next quarter. |
| Drivers | Growth slows, inflation cools and the Fed cuts more than priced. | Deficits increase bond supply; investors demand a higher term premium; inflation settles above target. |
| Evidence | Labour and inflation data; Fed statements; futures pricing of cuts. | Treasury refunding announcements; auction results; term premium estimates. |
| Catalyst | A weak employment report or a dovish shift in guidance. | A large increase in issuance, or weak demand at auctions. |
| Invalidation | Data re-accelerates and cuts are priced out. | Yields fall even as supply rises — demand is stronger than assumed. |
The deciding variable: the bull case is about the short end (what the Fed does); the bear case is about the long end (what investors demand to hold duration). Both can be right at once — the curve steepens — which is why many rates traders express this view as a curve trade rather than an outright one.
What both sides tend to miss: what's already priced. "The Fed will cut" only helps the bull case if it cuts more than futures already expect.
Example 4: the Japanese yen against the dollar
| Bull case (yen stronger) | Bear case (yen weaker) | |
|---|---|---|
| Claim | The yen strengthens against the dollar over three months. | The yen weakens against the dollar over three months. |
| Drivers | The rate gap narrows as the Bank of Japan tightens and the Fed eases; crowded carry trades unwind. | The rate gap stays wide, so borrowing yen to buy higher-yielding assets stays profitable; Japan tightens only slowly. |
| Evidence | BoJ and Fed guidance; the two-year yield spread; futures positioning in the yen. | Carry return versus volatility; Japanese investor outflows; the pace of BoJ moves. |
| Catalyst | A BoJ hike or a sharp risk-off move that forces carry positions to close. | A BoJ meeting that disappoints hawkish expectations. |
| Invalidation | The spread narrows but the yen doesn't strengthen. | Official intervention to support the yen. |
The deciding variable: speed. The bear case can be right for months and wrong in a week, because carry trades unwind all at once. The two cases aren't just opposite directions — they have completely different risk profiles.
What both sides tend to miss: that intervention risk is asymmetric. It caps how far the yen weakens, but does little to stop it strengthening.
Template: write your own bull and bear case
Copy this and fill in both columns before you trade. Write the side you don't hold first — it's harder once you've committed to the other one.
| Bull case | Bear case | |
|---|---|---|
| Claim | Asset, direction, timeframe | Asset, direction, timeframe |
| Drivers | Two or three forces, with the causal chain | Two or three forces, with the causal chain |
| Evidence | Sourced facts — mark assumptions separately | Sourced facts — mark assumptions separately |
| Catalyst | What forces a repricing, and when | What forces a repricing, and when |
| Invalidation | What proves this side wrong | What proves this side wrong |
| Priced? | How much of this is already in the price | How much of this is already in the price |
Then answer two questions underneath: What is the deciding variable? and What do both cases ignore? Those two answers are usually worth more than either column.
How to write a bear case for a stock you love
- Start from your own evidence. The strongest opposing case reads the same facts differently. If your bear case needs new facts, it's probably weaker than it should be.
- Write it as a pitch, not a list of risks. Give it a claim, drivers, a catalyst and a timeframe, as if you had to present it to someone.
- Find the real bears. Look for short reports, bearish analyst notes and high short interest, and understand the argument well enough to state it better than they do.
- Give it equal effort. If your bull case is two pages and your bear case is three bullet points, you haven't finished.
- Stop when it makes you uncomfortable. A bear case you can dismiss in a sentence is not the strongest one.
Common mistakes
- Treating the bear case as a formality. Written after the decision, it becomes a list of reasons you're comfortable ignoring.
- Arguing about direction instead of cause. Most disagreements come down to one variable. Find it.
- Ignoring what's priced. A correct case can lose money if the market already agrees with it.
- Forgetting the timeframe. A bull case over two years and a bear case over two months can both be right.
- No invalidation on either side. Without it, neither case can ever be proven wrong — so neither is useful.
Doing it faster
Writing an honest opposing case is the step most people skip, because it takes the most effort and is the least pleasant. Blindspot builds the strongest case for your trade and, just as carefully, the strongest case against it, alongside blindspot discovery, contradictions, an independent market view and invalidation conditions. No signals, no price targets — it scores the reasoning, never the trade.
Frequently asked questions
What is a bull case?
A bull case is the argument for why an asset's price should rise: a claim with a direction and timeframe, the drivers behind it, the supporting evidence, a catalyst, and the conditions that would prove it wrong.
What is a bear case?
A bear case is the argument for why an asset's price should fall. A good bear case has the same structure as a bull case — claim, drivers, evidence, catalyst and invalidation — rather than being a list of risks.
What is the difference between a bull case, a bear case and a base case?
The bull case is the optimistic scenario, the bear case the pessimistic one, and the base case the outcome considered most likely. Together they describe a range of outcomes rather than a single forecast.
Why are they called bull and bear?
The usual explanation is how each animal attacks: a bull thrusts its horns upward and a bear swipes its paws downward, matching rising and falling markets.
Should I write the bull case or the bear case first?
Write the side you don't hold first. Once you have committed to a position, it becomes much harder to build the opposing argument honestly.
This guide is general education about research process. It is not investment advice or a recommendation to trade any instrument. Trading involves risk of loss.