The Bear Pennant Set-Up
A hard decline followed by a coil rather than a bounce: highs stepping down, lows stepping up, and a range that runs out of room.
MadStockAlerts Research · Updated September 4, 2026
What to take away
- The pause converges instead of drifting, which is what separates it from a bear flag.
- The lower line is the reference the set-up completes through, and it rises a little every bar.
- The last lower high inside the triangle is where the reading stops holding.
- Bear pennants are short. A coil that outlasts its own decline has become a base.
- A contraction stores a move but does not choose its direction; the decline does that.
MAD Academy Training Video · 1:24
The coil after the fall
A bear pennant measures how tightly a market has compressed. Where the direction actually comes from, and the base it is most often confused with.
This lesson is part of a Stock Alerts + Tools plan.
The shape
Price falls sharply, then stops falling without recovering. Each bounce inside the pause tops out a little lower and each dip bottoms a little higher, so the range closes in on itself over a handful of bars until there is almost nothing left of it.
Against a bear flag, the difference is direction. A flag drifts upward against the decline and has a slope; a pennant has none. It is a market that has stopped moving rather than one that is retracing, and that stillness after a violent decline is the thing the pattern is actually describing.
- A steep, high-volume decline immediately before the coil begins.
- Two or more lower highs and two or more higher lows to draw both lines through.
- A range that contracts bar by bar rather than one that is merely narrow.
- Volume falling to a fraction of what the decline traded on.
Scroll the chart sideways to see all of it.
Why it forms
The decline repriced something quickly, and the coil is the market failing to agree on what the new price should be. Buyers step in a little higher each time, which puts in the rising lows; sellers who missed the decline offer a little lower each time, which puts in the falling highs.
What makes the coil bearish rather than neutral is the context it sits in. Nothing about a contraction says which way it resolves. The decline before it says that supply has recently been overwhelming, and the pattern inherits its direction from that rather than from anything inside the triangle.
Read the coil as a measurement rather than a prediction. It tells you the range has compressed and that the resolution will be large relative to it. The direction is a separate claim, resting entirely on the decline, and it is the half of the pattern most likely to be wrong.
| What to look at | Set-up intact | Set-up failing |
|---|---|---|
| The range, bar to bar | Contracting steadily toward the apex | Widening, or the highs stop falling |
| Volume through the coil | Draining to a fraction of the decline | Building on the up bars inside it |
| Where the coil sits | In the lower half of the decline | Climbing back toward where the decline began |
The price points that define it
A set-up is a shape plus a handful of prices. The shape is what makes it recognisable; the prices are what make it something that can be measured, reviewed afterwards and argued about honestly. These are the levels this one is read from.
| Level | Where it sits | What it tells you |
|---|---|---|
| The pole | From the top of the decline to the coil's first bar | The scale the measured objective is taken from, and the only part of the shape that argues for a direction. |
| The lower line | Drawn through the higher lows | The rising reference the set-up completes through. It moves up each bar, so a late break needs a smaller move than an early one. |
| The upper line | Drawn through the lower highs | The falling ceiling of the coil. Losing it is the first sign the contraction is resolving the other way. |
| The last lower high | The final rejection inside the triangle | The invalidation most descriptions use, because above it the lower-highs sequence the drawing rests on is no longer true. |
Where the set-up completes
- 1The triggerThe set-up completes on a close below the lower line. That line rises as the coil narrows, so the level is re-read each bar rather than fixed. Expanding volume on the break is the usual confirmation, with the same caveat as every bearish shape: declines resume on unremarkable volume often enough that its absence proves less than its presence.
- 2Where the reading stops holdingThe reading stops holding above the last lower high. The falling-highs sequence is what the upper line was drawn through, and once that sequence is broken the triangle describes a shape that has already stopped forming.
- 3The measured objectiveThe conventional measured objective subtracts the height of the pole from the break. The competing convention uses the width of the triangle at its base, which is smaller and more conservative; the two disagree routinely, and a target is worth much less than the level that says the reading was wrong.
- 4Through the moveThe convention expects a fast resolution and treats the apex as a deadline. A coil that drifts all the way into its point has usually spent whatever it stored, and a break that immediately stalls under the line rather than accelerating away from it is the common shape of a pennant about to squeeze.
Each of these describes where a convention puts a level, not what anybody should do at it. Whether a level is worth acting on at all is a question about position size, cost and the rest of a plan, and the answer differs for every account.
How often it follows through
Short coils after a steep, heavy decline, inside a market that is already falling, sit at the top of this band. The same drawing after a modest decline in a rising market sits at the bottom of it, and that context matters far more than how neatly the two lines fit.
Read that as a floor rather than an expectation. A set-up that follows through two times in three still leaves one in three that does not, and the one that does not can move further and faster than the two that did. That arithmetic is what position sizing exists to answer, and no pattern improves it.
What this number is not
It is not our record, it is not a forecast for any particular chart, and it is not the rate at which the measured objective is reached — that is always lower. It is a conservative reading of how often a completed bear pennant kept going before it went back through the level that invalidates it. Base rates move with the market, the timeframe and the exact definition used, and every one of those varies.
What failure looks like
The failure that costs the most is the one where the coil turns out to have been a base. Buyers were quietly absorbing the decline the whole time the range was narrowing, the break of the lower line finds nothing beneath it, and price reverses back through the upper line and keeps going. The tell is almost always in the volume inside the coil rather than in the break itself.
- Volume inside the coil is heavier on the up bars than the down ones.
- The break of the lower line closes back inside the triangle the same session.
- The coil has lasted longer than the decline that produced it.
Scroll the chart sideways to see all of it.
Seeing it on a live chart
Coils are easiest to judge with the volume strip showing. Compare the up bars and the down bars inside the narrow range: which side is trading is the question the outline cannot answer, and it is the question that decides which way the contraction resolves.
Open a chart — for members