The breakout often comes with strong selling pressure (volume) after the bears dominate the market sentiment. The formation is complete when the price action breaks below the lower trend line of the pennant. Most of the time, it signals a continuation of the prevailing downtrend after a downward breakout occurs. In my experience, this chart pattern is very bearish because the overall market is pessimistic, and traders don't feel like catching a falling knife. The two trend lines act as support and resistance levels for the market, and the breakout direction depends on whether prices break the support or resistance level first. When you draw two converging trendlines that connect the highs and lows of the consolidation, you'll see a chart pattern that looks like a triangular flag on a pole. FormationĪ bear pennant is a continuation pattern that forms when there is a strong downtrend, and the price action starts to consolidate in a small trading range. The breakouts perform better during strong downtrends with a taller flagpole and a wider triangle shape. However, the bear pennant breakout direction also depends on the shape of the triangle and the length of the flagpole. So if you want to tell whether a pennant is bullish or bearish, you just need to pay attention to the direction of the prevailing trend. So, for example, if the market is trending up, a formation of a bull pennant pattern will likely lead to a continuation of that uptrend as the bullish momentum continues.Īnd vice versa, if you're in a downtrend, and you see a bear pennant chart pattern forming, it's likely that the bearish momentum will continue after a breakdown from the formation. Pennants are considered to be continuation patterns, which means that they signal a continuation of an existing trend. To answer this question, you need to understand the characteristics of a pennant formation, and how it significantly affects the direction of the overall market. How Do You Tell If a Pennant Is Bullish or Bearish? When this happens, there is a high probability that the prevailing downtrend will continue as the support level has been broken. ![]() ![]() You can use this bearish chart pattern as a typical signal for going short the market, or you can use it as a breakout indicator to confirm an existing downtrend.Ī breakout to the downside occurs when prices break below the lower trendline of the flag formation. This signals a pessimistic outlook on the market, and often leads to further declines after a breakdown from the pattern. The bear pennant formation gets its name because it's usually followed by a strong downtrend. The pattern looks like an ascending wedge if it slopes upwards. The pennant is created by two converging trendlines that form a symmetrical triangle.The flagpole is typically created by a steep decline in price, followed by a short period of consolidation.The pattern is made up of a flagpole and a pennant. It is formed when the price action makes a series of lower highs and higher lows that creates a triangular flag at the bottom of the market. ![]() A bear pennant chart pattern is a technical analysis pattern that signals a continuation of a bearish trend.
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