Bearish Rectangle & Bullish Rectangle

Rectangles are chart patterns which indicate trend continuation and form when price movements are restricted within strong, parallel support and resistance levels. Both Bearish Rectangles and Bullish Rectangles mirror periods of consolidation or indecision between buyers and sellers, with an asset's price repeatedly testing the support and resistance levels until it manages to break out in one direction.

Bearish Rectangle Chart

Bearish Rectangles are usually traced in downtrends. As you can see from the chart, the asset's price eventually manages to break out, resuming its downward movement. Traders can benefit from Bearish Rectangles by going short just below the support level once the price breaks the bottom of the rectangle.

Bullish Rectangle Chart

Bullish Rectangles are often spotted in uptrends. As the chart shows, the initial upward movement is succeeded by a rectangle, which is in turn followed by a continuation of the trend.

To take advantage of this chart pattern, traders go long after the price breaks above the top of the rectangle, expecting the price to head upwards.

Did you know?

In terms of trading volume, the FX market is by far the largest market in the world.

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Pro Tip

Always have an exit strategy.