A flag and a pennant are both continuation patterns in technical analysis, but they differ in shape and formation.

A flag forms after a sharp price movement, known as the flagpole. It appears as a small, rectangular channel that slopes slightly against the prevailing trend. For example, in an uptrend, the flag tilts downward; in a downtrend, it tilts upward. Flags usually form over a short period, and their parallel trend lines give them a box-like appearance.

A pennant, on the other hand, also follows a strong flagpole move but forms a small symmetrical triangle instead of a rectangle. Its trend lines converge, indicating a brief consolidation period before the trend resumes. Pennants are typically shorter in duration than flags and often show declining volume as they develop.

In both cases, the breakout usually occurs in the same direction as the original move, with a price target often estimated by adding the length of the flagpole to the breakout point.

The main difference lies in their shapes: a flag is rectangular with parallel sides, while a pennant is triangular with converging sides. Both reflect a pause in the trend rather than a reversal.