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\n Table of Contents<\/span>\n <\/div>\n - \n
- What is the bear pennant pattern?<\/a><\/li>\n
- How to identify and use the bear pennant?<\/a><\/li>\n
- How to trade the bear pennant<\/a><\/li>\n
- Trading example<\/a><\/li>\n
- The bear pennant pattern – Pros and cons<\/a><\/li>\n
- Bear pennant pattern (VIDEO)<\/a><\/li>\n
- Key takeaways<\/a><\/li>\n
- Frequently asked questions (FAQs)<\/a><\/li>\n <\/ul>\n<\/div>\n\n\n\n
What is the Bear Pennant Pattern?<\/h2>\n\n\n\n
The bear pennant is a continuation pattern that signals that the ongoing trend is likely to continue. It occurs during a bearish trend and indicates a possible extension of a downtrend. Traders use this classical chart pattern<\/a> to join the existing trend and short sell an asset. <\/p>\n\n\n\n
How to Identify and Use the Bear Pennant?<\/h2>\n\n\n\n
The bear pennant occurs during a pronounced downtrend in price. It consists of two parts: the flagpole and the pennant. The GBP\/USD chart below gives us a great illustration of the formation.<\/p>\n\n\n\n
![\"bear](\"https:\/\/howtotrade.com\/wp-content\/uploads\/2022\/04\/Bear-Pennant-chart-pattern-flag-pole-pennant-1024x585.png\")
<\/figure>\n\n\n\nFollow the progression below to identify the bear pennant:<\/p>\n\n\n\n
- \n
- Spot a downtrend in price<\/li>\n\n\n\n
- Draw the flag pole<\/li>\n\n\n\n
- Recognize a period of subsequent market consolidation<\/li>\n\n\n\n
- Draw trend lines on the upper and lower bounds<\/li>\n<\/ul>\n\n\n\n
Draw the Flag Pole<\/h3>\n\n\n\n
A downtrend in price is a series of lower periodic highs and lows. For the bearish pennant<\/strong>, the downtrend is the flag pole. Once identified, a trendline<\/a> may be drawn to help contextualize price action.<\/p>\n\n\n\n
Draw the Pennant<\/h3>\n\n\n\n
The pennant is a period of consolidating price action. It signifies a tightening of the market over time. To define pennant, draw a line that connects the upper bounds of price action and a line to connect the lower bounds.<\/p>\n\n\n\n
Bear Pennant Pattern vs. Bullish Pennant Pattern<\/h3>\n\n\n\n
Bullish and bearish pennants are both continuation technical analysis indicators. However, they differ in several ways:<\/p>\n\n\n\n
- \n
- The bullish pennant suggests an extension of an uptrend.<\/li>\n\n\n\n
- The bearish pennant signals the extension of a downtrend. <\/li>\n\n\n\n
- The bullish pennant is a buy signal.<\/li>\n\n\n\n
- The bearish pennant is a sell signal.<\/li>\n<\/ul>\n\n\n\n
Below is a picture of a bull pennant. Note that the <\/em><\/strong>bull pennant pattern<\/em> forms during an uptrend, not a downtrend.<\/em><\/strong> Bearish pennants form in downtrends.<\/p>\n\n\n\n
![\"bearish](\"https:\/\/howtotrade.com\/wp-content\/uploads\/2022\/04\/bearish-flag-pennant-vs-bullish-flag-pennant-1024x590.png\")
<\/figure>\n\n\n\nHow to Trade the Bear Pennant Chart Patterns?<\/h2>\n\n\n\n
Like many other chart patterns<\/a>, there\u2019s a process to trading bear pennant patterns. The process is simple and includes three steps: determine market entry, set the stop-loss, and assign a profit target. <\/p>\n\n\n\n
1. Market Entry<\/h3>\n\n\n\n
The bearish pennant pattern suggests that downward pressure is on the market. Thus, a short-side market entry is appropriate. To enter the market, place a sell market or sell stop-limit\/market order beneath the pennant’s lower trend line. <\/p>\n\n\n\n
A new short position is opened upon the sell being executed.<\/p>\n\n\n\n
2. Stop Loss<\/h3>\n\n\n\n
When trading the bear pennant pattern, stop losses are easy to locate<\/strong>. Place the stop loss above the upper trend line of the pennant.<\/p>\n\n\n\n
Remember, buying and selling currency pairs is done on margin<\/a>. And margin carries significant risk. That\u2019s why using stop losses in your trading strategies is highly recommended. <\/p>\n\n\n\n
3. Profit Target<\/h3>\n\n\n\n
The bear pennant pattern is a signal to short the market<\/strong>. So, profit targets will be located beneath the pennant’s lower trend line.<\/p>\n\n\n\n
- How to identify and use the bear pennant?<\/a><\/li>\n
![\"bearish](\"https:\/\/howtotrade.com\/wp-content\/uploads\/2022\/04\/Bearish-Flag-Pennant-Trade-Example-1024x587.png\")
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