Once she starts wearing the Pink Sweater, Kendrick gains powers over her friends and teachers. She likes the power and wears the sweater ever day, afraid that if she takes it off, someone may take it, or if she washes it, the pink sweater may lose its powers. She wears it until the pink color bleeds out and the yarn begins to unravel. The powers don't leave her as it ages, but people stay away from her. She starts to smell. Her friends stop calling her. Her mother tries to steal the sweater, but is thwarted emotionally (with tantrums, etc.). Her school asks her to stop attending until she washes or stops wearing the pink sweater. With all that power, she has nobody to use it on. Nobody believes in the magic of the pink sweater. In the end, her mother convinces her to give up the sweater and she loses her magic. She is brought back into the fold.
The pink sweater represents creativity--nobody believes that Kendrick has it in her.
What was the magic? It could be something obvious, like creation. Or it can be not well developed. Why doesn't she take a chance and wash it instead of just giving up? She chooses to give it up (go to school, etc.) because she's afraid the magic will not be worthwhile, particularly if she's alone with it. She needs the head patting.