What does a bear pennant mean?

What does a bear pennant mean?

A bearish pennant is a technical trading pattern that indicates the impending continuation of a downward price move. They’re essentially the opposite to bullish pennants: instead of consolidating after a move up, the market pauses on a significant move down.

Is a pennant pattern bullish or bearish?

A bullish pennants pattern is formed after a sharp rise in the prices of the stock. After a long uptrend, traders try to close their position with the assumption that reversal is going to come. The prices began to consolidate as the traders start exiting the stock.

How do you trade a bearish pennant pattern?

Bearish Pennants They always start with a flagpole – a steep drop in price, followed by a pause in the downward movement. This pause forms a triangular shape, known as the Pennant. There is then a breakout, and the downward movement continues. Traders look to enter short trades on a break below the pennant.

What is a pennant formation?

In technical analysis, a pennant is a type of continuation pattern formed when there is a large movement in a security, known as the flagpole, followed by a consolidation period with converging trend lines—the pennant—followed by a breakout movement in the same direction as the initial large movement, which represents …

Is the bear pennant pattern a continuation pattern?

The bear pennant is a bearish chart pattern that aims to extend the downtrend, which is why it is considered to be a continuation pattern. It works in the same manner as a bull flag, with the only difference being that it is a bearish pattern looking to push the price action further lower after the period of consolidation.

What makes a pennant formation a bearish pennant?

While the price is still consolidating, more buyers or sellers usually decide to jump in on the strong move, forcing the price to bust out of the pennant formation. A bearish pennant is formed during a steep, almost vertical, downtrend.

What do you do with a bear 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 are always forming on charts.

What is the strength of a bear pennant?

Hence, a strong bear pennant corrects to around 38.2% before breaking the lower trend line. We said earlier that the bear pennant is a continuation pattern as it tends to help the existing downtrend to continue. Arguably, the biggest strength of a bear pennant is that it helps traders identify the stage at which the trend is currently in.