Bear Pennant : How to Trade the Bear Pennant Pattern

bear pennant pattern

It’s worth noting that the bear pennant pattern can also result in a false breakout, where the price briefly breaks out of the pennant before reversing course. As with any trade, it’s crucial to have solid risk management and for some that means placing a stop loss. For this trade, you could place your stop loss just above the highs of the breakout candle.

Tips for Trading bearish Pennant Patterns

The upper trend line resistance trend line of the pennant also corresponds to reaction highs. Traders could have watched for a breakout from these levels as a buying opportunity and profited from the subsequent breakout. Traders may choose to trade pennant formations because pennants align with the trader’s psychology. In either case, understanding the psychological factors behind pennant patterns can provide valuable insights for traders seeking to make informed decisions. Another reason for failed pennant patterns is external market events or news that override the technical signals provided by the pattern. Unexpected announcements, geopolitical events, or economic data releases can quickly change market sentiment, rendering the pennant pattern obsolete.

Where to cut losses

On the other hand, flags exhibit a more rectangular shape. The parallel trendlines in a flag pattern indicate a brief consolidation, with the price moving in a channel against the prevailing trend. Like pennants, flags are typically seen as a continuation pattern, and the breakout direction is expected to align with the existing trend. Enter too late, and you might miss the profit train altogether. Use your knowledge of chart patterns, especially bear pennants, to time your entry and exit points like a pro.

  1. However, some sellers take profits, and buyers step in to take advantage of the low prices, causing the price to consolidate and form the pennant.
  2. Bearish candlesticks form the pole, followed by consolidation, then a fall downwards.
  3. It’s tricky to distinguish in real-time before the breakout trigger confirms the direction and other chart shapes can resemble pennants temporarily before changing.
  4. When trading, the same approach can be applied to both the Bullish and Bearish Pennant patterns however, the Bullish Pennant will have a long bias and the Bearish Pennant, a short bias.

Is Bear Pennant Bullish?

It can alert you of deep and long corrections in the market. Once the breakout is confirmed, initiate a short-sell position. This means you are betting on the price continuing to fall.

Can a bear flag be bullish?