Rectangle

Identification Criteria

• At least two clear touches of a horizontal resistance line and two clear touches of a horizontal support line.
• Price oscillates between the two boundaries without a strong directional trend inside the range.
• Volume often diminishes as the range matures and traders lose interest, then expands on the eventual breakout.
• The longer and more clearly-defined the range, the more significant the eventual breakout is generally considered to be.

Formation Logic

A rectangle reflects a genuine, if temporary, equilibrium between buyers defending a price floor and sellers defending a price ceiling. Because both sides are actively defending their level rather than one side gradually giving ground (as in a triangle), the pattern carries no inherent directional bias until one side finally fails.

Breakout / Confirmation Rule

Confirmation requires a decisive close beyond either boundary, ideally accompanied by a volume increase. Because the range can persist for a long time with repeated false pokes at either boundary, waiting for a sustained close — not just an intraday touch — meaningfully reduces whipsaw risk.

Measured-Move Price Target

A commonly used, purely illustrative measured-move technique: measure the height of the rectangle (resistance minus support), then project that distance in the direction of the eventual breakout.

Common Pitfalls

• The single biggest risk is guessing the breakout direction while price is still inside the range — like the symmetrical triangle, the pattern is bilateral by definition.
• Repeated false breakouts at either boundary are common, especially in lower-liquidity instruments.
• A rectangle can be difficult to distinguish from a developing triple top or triple bottom until one boundary clearly fails.