A pennant pattern is a technical analysis chart formation used by traders to predict the continuation of a strong price movement. It typically occurs after a significant price surge (uptrend or downtrend) and resembles a small triangle (or flag) on the price chart.

A pennant forms when the price consolidates in a narrow range, following a strong directional movement. This consolidation creates converging trend lines, giving the pattern its triangular appearance. The two types of pennants are bullish and bearish.

1. Bullish Pennant: Appears after a price rally. Traders anticipate that once the consolidation ends, the price will break out and continue rising.
2. Bearish Pennant: Forms after a price decline, suggesting that the price will likely continue falling after the consolidation.

Key characteristics of a pennant include:
- A preceding strong price movement (flagpole).
- Symmetrical, converging trend lines during consolidation.
- A breakout in the same direction as the initial price move.

Traders often enter trades at the breakout point and set targets based on the height of the flagpole. Pennants are particularly valued for their reliability in trending markets.