DEFINITION of 'Rectangle'

A pattern formed on a chart where the price of a security is trading within a bounded range in which the levels of resistance and support are parallel to each other, resembling the shape of a rectangle. This pattern signals that the price movement, which has stalled during the pattern, will trend in the direction of the price breakout of the bounded range.


The bounded range, or rectangle, is a period of consolidation in which market participants are generally indecisive. The formation of this pattern will see the price of the security test the levels of support and resistance several times before a breakout. Once the security breaks out of the range, in either direction, it is considered to be trending in the direction of the breakout.

  1. Consolidation

    In technical analysis, the movement of an asset's price within ...
  2. Pattern

    In technical analysis, the distinctive formation created by the ...
  3. Channel

    1. The system of intermediaries between the producers, suppliers, ...
  4. Resistance (Resistance Level)

    A chart point or range that caps an increase in the level of ...
  5. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  6. Support (Support Level)

    The price level which, historically, a stock has had difficulty ...
Related Articles
  1. Trading Systems & Software

    Darvas Box Traps Elusive Returns

    Follow a modern trade to see how this old strategy still captures profits today.
  2. Active Trading Fundamentals

    Support And Resistance Basics

    Understanding the concept of Support and Resistance in trading can drastically improve your short-term investing strategy.
  3. Charts & Patterns

    Continuation Patterns: An Introduction

    Those random movements in the charts actually form patterns. Learn the basics of what these patterns are.
  4. Trading Strategies

    Introduction To Technical Analysis Price Patterns

    To "find your game" in technical analysis, you need to be able to recognize reversals and continuations as they form.
  5. Forex Education

    The Rectangle Formation

    Find out how this technical pattern can be useful in your trading arsenal.
  6. Trading Strategies

    Basics Of Technical Analysis

    Learn how chartists analyze the price movements of the market. We'll introduce you to the most important concepts in this approach.
  7. Chart Advisor

    Pay Attention To These Stock Patterns Playing Out

    The stocks are all moving different types of patterns. A breakout could signal a major price move in the trending direction, or it could reverse the trend.
  8. Chart Advisor

    Now Could Be The Time To Buy IPOs

    There has been lots of hype around the IPO market lately. We'll take a look at whether now is the time to buy.
  9. Chart Advisor

    Copper Continues Its Descent

    Copper prices have been under pressure lately and based on these charts it doesn't seem that it will reverse any time soon.
  10. Technical Indicators

    Using Pivot Points For Predictions

    Learn one of the most common methods of finding support and resistance levels.
  1. How do I Implement a forex strategy when spotting a Rectangle Pattern?

    A rectangle pattern is formed when a market trades back and forth within a range that can be identified by drawing roughly ... Read Full Answer >>
  2. What are some of the most common technical indicators that back up Doji patterns?

    The doji candlestick is important enough that Steve Nison devotes an entire chapter to it in his definitive work on candlestick ... Read Full Answer >>
  3. Tame Panic Selling with the Exhausted Selling Model

    The exhausted selling model is a pricing strategy used to identify and trade based off of the price floor of a security. ... Read Full Answer >>
  4. Point and Figure Charting Using Count Analysis

    Count analysis is a means of interpreting point and figure charts to measure vertical price movements. Technical analysts ... Read Full Answer >>
  5. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  6. How are double exponential moving averages applied in technical analysis?

    Double exponential moving averages (DEMAS) are commonly used in technical analysis like any other moving average indicator ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  3. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  4. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  5. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  6. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
Trading Center