Definition
Rectangle forms when price bounces between parallel horizontal support and resistance levels. It can be continuation or reversal depending on breakout direction. Trading range strategies work within; breakout traders wait for the resolution.
Formula
Price Target = Breakout Point ± Rectangle Height
Example
Stock trades between $45 support and $50 resistance for weeks. A break above $50 targets $55; below $45 targets $40. Height is $5.
FAQ
What is Rectangle Pattern?
A consolidation pattern with horizontal support and resistance.
How do you calculate Rectangle Pattern?
A common formula for Rectangle Pattern is: Price Target = Breakout Point ± Rectangle Height
Why is Rectangle Pattern important?
Rectangle Pattern helps investors evaluate chart patterns and make more informed decisions.