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. Watch our video on how to identify and trade bear pennants.
What Is a Bear Pennant Pattern & How to Identify 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. You will see many bear pennant patterns that consolidate near resistance levels then when it rejects, price action breaks down out of the apex of the pennant.
Bear pennants are bearish continuation patterns. That means as a trader, you are looking for these are price movements you are expecting to show that price wants to continue to decline.
They are important patterns to learn if you’re a trader. It doesn’t matter if you are a long bias or short bias trader. The important thing is to know the pattern. If you’re a student of the market, you want to have an understanding of everything, even if you don’t plan on using that technique. Just be in the know.
Now, you want to look for bear pennant patterns to appear in strong downtrends or even newly formed downtrends. Typically after a major bearish breakdown (Like a daily head and shoulders pattern for example).
They tend to be shorter term continuation patterns.
The bearish candlesticks that form the pole followed by a consolidation period before resuming the fall downwards. Bear pennants are similar to bear flags.
They both have flag poles and consolidation forming the flag. You might hear an experience trader reference one that looks like a flag or a pennant. They are both similar in shape and easy to mix up, so don’t feel silly if you call it one and it could look like the other. Toe-may-toe or Toe-mah-toe as they say.
The pennant is more triangular in its consolidation phase, while the flag is more rectangular in its phase. They both tell the same story though.
We get these Japanese candlesticks patterns from a rice trader who realized long ago that emotions affect the price of securities and that they could be displayed on a chart.
Basics of Bear Pennants
Bear pennant chart pattern has it’s trend lines come together in a point during consolidation. Hence the name pennant. If you’re into sports your team probably sells pennants with it’s name and logo on it.
The pennants in the stock market have the same look. They start wide and come to a point. There is a big push in volume forming the flagpole.
Ideally the flag pole is long and strong and accompanied by some strong selling volume to confirm the move down. The stronger the selling volume, the better. Check your volume bars people!
Read our stock volume post to further grasp the importance of what volume means in trading. When bear pennants are forming, the sellers are in control. You know, the bears. The bears are on parade and control the momentum of the stock.
Consolidation that occurs is the the two sides fighting to regain control. That consolidation time forms many different candlesticks such as doji candlesticks, dragonfly doji candlesticks, gravestone doji candlesticks, hammer candlesticks and even bullish candlesticks.
That’s a lot of candlesticks to remember..but each one is important and tells a story. Add them together and you get a pattern and patterns make up everything in trading.
Whether you have realized it or not when trading, you were buying during multiple patterns…you just didn’t know what they were. Take our courses and study and become a candlestick master! Also, check out our stock market basics post.
Candlesticks are an important part of technical analysis. The real bodies and wicks form key levels of support and resistance. Not only do candlesticks form these levels but so do the indicators (bookmark our day trade watch list page)
Bearish pennants come to a point that forms a strong support. In order for the trend to continue, those candlesticks needs to beak that support. Support and resistance along with volume can make or break a pattern breakout.
Without candlesticks, techniques such as the simple moving average formula and VWAP trading strategy would be more challenging to use. It’s also imperative that you can draw trend lines.
If you need help learning these things, hop on our live streams! We are live daily teaching these types of techniques and we have an entire library dedicated to teaching you advanced analysis.
Trend lines not only confirm a trend but can be used as support and resistance in patterns as well as pattern finders. Without trend lines you wouldn’t be able to map out a bear pennant correctly. We teach how to trade candlesticks on our live daily streams. Check out our trading service to learn more and become part of the pay it forward movement. Hope is alive and well in our community.
Is a Pennant Bullish or Bearish?
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.
Patterns Make Other Patterns
Patterns are always forming on charts. Within those patterns other patterns form. Being able to see patterns within patterns is a great skill to acquire. Practice it. Be it penny stocks or potstocks, they will all have a pattern to trade.
Spend your time studying patterns so you know them when they come across their charts.
Patterns don’t always do what you think they will. They break down instead of continuing their trajectory. There’s usually a heads up based on the candlesticks forming along with the technical indicators.
It’s important not to get bogged down in the fine points of patterns. A lot of patterns say the same thing. For instance, bear flags and bear pennants are both bearish continuation patterns.
Do you want to spend 3 hours trying to figure out exactly which one it is? No! As long as you know that both are bearish, you’re good.Looking for more training? Take our free stock trading courses to help you get started. Save your money. Learn for free and then when you’re ready come join us in the trade rooms and get our stock alerts and become a better trader.
How to Trade Bear Pennant Patterns
- 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 pennant take short entry.
- Watch if price can break below low of flag pole.
- Use candlestick close above midway of pennant as your stop.
Patterns break down so pairing them with technical indicators as well as other patterns paint a clearer picture. Bear pennant’s don’t always continue, no pattern is a guarantee. They are only a probability, but knowing the probability game is key. Never forget that you need to know where major support levels are, otherwise you could be entering short at a bear pennant AT SUPPORT! Yikes!
The stock market is a tug of war between buyers and sellers. Bear pennants chart patterns form when the market and/or a stock is in a down trend. They can also form at the beginning of a new downtrend. They are similar to bear flags but not identical.
The sellers are out in force. Waiting for confirmation of the the breakdown is smart because patterns can reverse and break down.
That’s why being able to see patterns within patterns is important. When you know them, and other’s don’t, you have an advantage. And you can profit! Doesn’t that sounds nice!
What Is the Difference Between a Flag and a 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.
The Bottom Line
Open a paper trading account and study finding patterns in charts. Use that account to practice trading those patterns. It’s so smart to make hundreds of trades in your paper account before using real money.
If you can’t make money in a trading simulator, how can you expect to make money with real money? It’s hard! And you need to get some wind beneath your wings before you can fly.
You won’t find another community that tells it to you straight…that’s what we do. No sugar coating. Take our candlesticks patterns course to learn the rest of trading patterns.
This allows you to really be comfortable trading patterns along with indicators. The longer you paper trade, the better. Then you switch to a real account, and practice trading with small size.
Focus on making winning trades, not big bucks. The money comes later after you’ve paid your dues. Take the time! You’ll learn from your mistakes without blowing up your account.
Take our free online trading courses. Remember Bear Pennant patterns and how they work and you’ll be one step closer to candlestick trading mastery.