Bearish Pennant Pattern

What is a bearish pennant pattern?

A bearish pennant, also called bear pennant, occurs when the price retraces part of its prior fall, before resuming its downtrend.

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Duration

A pennant is a short-term pattern, which tends to occur over 1 to 3 weeks, as the price consolidates.

Characteristics

This pattern is similar to a bearish flag, except that trendlines converge towards one another in a triangular manner.

1. The pennant pattern rests on a pole, which represents a strong prior downward move in price. Remember that a pennant pattern cannot occur without a pole.
2. The pennant consists of two trendlines that converge towards one another, in a triangular manner.
3. A pennant typically retraces less than a flag. A deeper retracement could be indicative of a symmetrical triangle.

Trading volumes

Trading volumes generally rise as prices fall and disorderly selling takes place. You should expect volumes to remain subdued as the pennant forms. Lower volumes suggest that buyers lack conviction. This lays the ground for the downtrend to resume.

Bearish pennant trading tips

Look for the price to break below the lower trendline to confirm the bearish pennant pattern, before going short. The break below the trendline that provided support should happen on rising volume.

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