The main features of the Bearish Pennant pattern
1. Sharp downward movement: The pattern begins with a sharp downward movement of the price, which creates a vertical segment called a pole.
2. Tapering Triangle: After the pole, the price begins to form a triangle with descending resistance and support lines. The vertices of the triangle converge, creating a narrowing.
3. Trading Volumes: Trading volumes can play an important role in the analysis of the Bearish Pennant pattern. An increase in volumes on the formation of the pole and narrowing can confirm the strength of the pattern signal.
How to use the Bearish Pennant pattern in trading
1. Trend Definition: The Bearish pennant pattern indicates a continuation of the downtrend. Traders can look for this pattern after a sharp downward movement of the price.
2. Confirmation of the signal: Confirmation of the signal of the Bearish Pennant pattern includes a breakdown of the lower line of the triangle, indicating the continuation of the downward trend. When the price breaks through the lower line, it can be considered a signal to enter a short position.
3. Setting Targets and Stop Loss Levels: Traders can use the Bearish Pennant pattern to determine target levels and stop loss levels. The target can be a level that corresponds to the height of the pole, and a stop loss can be placed above the upper line of the triangle to protect against potential losses.
It is important to remember that the successful use of the Bearish Pennant pattern requires practice, experience and additional confirmatory analysis. Traders often combine this pattern with other tools and strategies to increase the reliability of signals and make informed decisions.
