Bear pennants are one of the most popular bearish patterns to be bearish on. They consist of either a large bearish candlestick or several smaller bearish candlesticks down forming the flag pole, followed by several smaller bullish candlesticks forming consolidation into a triangle, which forms the pennant (triangle). Look for price to fall out of the pennant to confirm bearish breakdown.
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What Are Bear Pennants?
A bear pennant pattern consists of a larger bullish candlestick which forms the flag pole. It’s then followed by several smaller consolidation candles that form a pennant. A common place to see this set up is during consolidation near resistance levels; once it rejects, price action breaks down out of the apex of the pennant. Which can cause an increase in a pressure to the downside from sellers and shorts.
Bear pennants are bearish continuation patterns; look for these price movements to show that price wants to continue to decline.
Ideally look for a bear pennant to appear in strong downtrends or even newly formed downtrends. Typically after a major bearish breakdown; such as on a daily head and shoulders pattern.
Bearish candlesticks form the pole, followed by consolidation, then a fall downwards. Bear pennants are similar to bear flags.
Both have flag poles and consolidation forming the flag. A trader may reference a chart set up that looks like a flag or a pennant. They are both have a similar shape and easy to mix up, it could look like the other.
The pennant is more triangular in its consolidation phase, while the flag is more rectangular in its phase.
Basics of Bear Pennants
Bear pennant trend lines come together in a point during consolidation. Pennants are a classic set up for trading stock. They start with a big push in volume forming the flagpole with volume becoming steady during consolidation coming to a point completing the pennate shape.
Ideally, the flag pole is long and strong followed by a strong increase in selling volume to confirm the move down. The stronger the selling volume, the better. Be sure to observe what the volume bars and other technical tools are telling in regards to what to possibly expect the pattern to do next.
When bear pennants are forming, sellers are in control. Consolidation occurs due the two sides fighting to regain control. During consolidation periods many different candlesticks form which could cause some confusion, so be sure to wait for confirmation.
How to Trade Bear Pennant Patterns
- Watch for a bearish candlestick that forms a flag pole
- Look for several consolidation candles that form a pennant and hit resistance levels
- Once price breaks down out of the apex of the pennant take short entry
- Watch if price can break below low of flag pole
- Use candlestick close above midway of pennant as stop
Daily chart of $XNET – Many bear pennants forming on the daily time frames. Note how the patterns broke down and continued the trend.
TrendSpider charting platform is awesome at finding candlestick patterns on a variety of set ups and time frames.
Frequently Asked Questions
Pennants can be either bullish or bearish. A bull pennant starts with a bullish candlestick that forms flag pole and then consolidation forming a pennant. A bear pennant starts with a bearish candlestick that forms flag pole and then consolidation forming the pennant. You go long with a bull pennant and short with a bear pennant.
There isn't much difference between a flag and a pennant pattern other than the shape. A flag has more of a block or rectangular shape. A pennant has more of a triangular or pennant shape. They are both telling the same story though.
