Rectangle
Price bounces between a flat floor and a flat ceiling for a while, then leaves the range.
What it shows
A rectangle has two flat lines, one through highs and one through lows, with price moving between them. It is the same shape as a horizontal channel. We call it a rectangle when the range is a pause inside a larger move and price has left it.
The pattern is complete when price closes outside the box.
How we find it
The same code that draws it on your chart follows these steps, with the same result every time.
- Find at least 2 highs within 1.5% of each other and at least 2 lows within 1.5% of each other.
- Draw a line through each group.
- Require the range to be at least 3% tall and at least 20 bars wide.
- Mark complete when a close leaves the box by more than the margin.
Starting values: Tolerance 1.5%; Minimum height 3% of price; Minimum length 20 bars. These are proposed and will be tuned on real price data before launch.
How to read it
- The shaded box is the range.
- Dots are touches of the top and bottom.
- The gold dot is the first close outside the box.
Status labels you may see
| Label | What it means |
|---|---|
| In the box | The last close is inside the range. |
| Closed above | Close is above the top. |
| Closed below | Close is below the bottom. |
What cancels it
There is nothing to cancel before a break. After a break, a close back inside the box is a failed break.
What traders check next
- Volume at the edges and at the break.
- How long the box lasted.
- Whether the move before the box was up or down.
Limits
- Long boxes can be hard to tell apart from noise.
- Many breaks fail.
- Heights depend on the tolerance.
Try it in forecastviz
- Open any ticker and choose Continuation patterns → Rectangle in the left menu.
- Switch between 3M, 6M, 1Y to see how the picture changes.
- Compare with Horizontal channel and Ascending triangle on the same chart.
Questions
How is it different from a horizontal channel?
The shapes are the same. A rectangle is shown as a pattern when price leaves the box.
Which way does it break?
Either way. We do not claim a rate.
Related trends
Further reading
- Edwards and Magee, Technical Analysis of Stock Trends
- Bulkowski, Encyclopedia of Chart Patterns
- O'Neil, How to Make Money in Stocks
Educational only. Not financial advice, and not a price forecast. Charts are drawn by code from past price data, which may be delayed.