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Bearish continuation. Sharp drop creates the pole, small triangle consolidation is the pennant, then breakdown.
The Bear Pennant is a bearish continuation pattern that forms after a sharp downward move (the flagpole). Price then consolidates in a small symmetrical triangle — converging trendlines with lower highs and higher lows — before breaking down to continue the prior move.
Think of the pennant as a brief pause where bears catch their breath. The tight consolidation represents equilibrium between profit-taking bears and hopeful dip buyers, but the prior bearish momentum typically wins. The breakdown from the pennant resumes the selloff, often with a measured move equal to the flagpole.
The Bear Pennant represents a temporary truce in a bearish market. The flagpole is the initial sharp decline — panic selling, stop-loss cascades, and high volume drive price down quickly. Sellers are dominant and bears are aggressive.
Then comes the pause. Short sellers take profits, some traders attempt to buy the dip, and price begins to consolidate in a narrowing range. Each bounce is weaker (lower highs) and each dip finds slightly higher support (higher lows), forming the pennant shape.
But this equilibrium is fragile. Volume typically declines during the pennant, showing decreasing participation. When price breaks below the pennant's lower trendline — often on expanding volume — the original selling pressure resumes. The measured move target equals the flagpole length projected from the breakout point.
Conservative: Enter short on a break below the pennant's lower trendline.
Aggressive: Enter short when price tests the pennant's lower boundary.
Above the upper boundary of the pennant consolidation. A breakout above the pennant invalidates the bearish continuation.
Measured Move: Project the height of the flagpole (prior drop) downward from the breakdown point. T1: 50-61.8% of flagpole for conservative target. T2: Full flagpole projection.
Often 1:3 or better due to the flagpole projection. Tight pennant consolidations create excellent R:R setups.
Bear Pennants are among the most reliable continuation patterns because of the clear structure: impulse, consolidation, continuation. The key is confirming the breakout direction before entering.
Enter on the break of the lower trendline, not before. Anticipating the breakdown leads to getting stopped out on false moves.
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