The bear pennant pattern is found within a downtrending stock. This pattern is named for the resemblance of an inverted pennant on a pole. The bear pennant is a continuation pattern with narrowing price action following a constant decline. The technical sell point is when price penetrates the lower trend line of the pennant area, ideally on volume expansion.
Context: Found within a downtrend.
Appearance: The decline has solid volume and the downward price action is consistent, which forms the look of an inverted flagpole. The resting period and narrowing price action is characterized by volume contraction as downside intensity is temporarily interrupted. This forms a pennant which also resembles a small symmetrical triangle. The pennant portion of the pattern has highs and lows which can be connected by small trend lines which converge.
Breakout Expectation: The height of the flagpole may be subtracted from the breakout area at the end of the pennant to determine the expected decline which follows. This is why the bear pennant pattern is often found in the middle of stock declines as a continuation pattern.
This stock formed a bear pennant patterns during its downtrend. The bear pennant was merely a resting period for this stock before it continued lower. Notice the secondary decline was equivalent to the inverted flagpole which preceded the pennant pattern.
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Be sure to learn about the bull pennant pattern too.
