Rectangle (Trading Range / Box)

Overview

A rectangle is a pattern in which price oscillates between parallel horizontal support and resistance. Also called a "trading range" or "box", its upper and lower boundaries run almost flat, drawing a literal rectangle on the chart.

In most cases the rectangle appears as a continuation pattern. Mid-trend, participants pause to catch their breath: buyers and sellers agree on a known band of value, and inside that band profit-taking and dip-buying (or rally-selling) cycle back and forth. But when a rectangle forms at a major top or bottom, it can resolve as a reversal.

Unlike a triangle, a rectangle does not contract. The same highs and the same lows are tested repeatedly — a different psychology than the triangle's "consensus dissolving". A rectangle is "both sides agreeing that price belongs in this zone". The breakout comes when that agreement finally fractures.