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?

If overwhelmed by pessimism and falling prices, the FX market is defined as “bearish”, while if characterised by optimism and rising prices, it is called “bullish”. These two terms derive from the way in which bears and bulls attack their opponents, with the former swiping its paws downwards and the latter thrusting its horns upwards.

Word of the day
"Simple Moving Average (SMA)" - A representation of an asset’s average price over a period of time.
Pro Tip

Stable Internet connection is a pre-requisite for trading.

UP