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Rectangle Chart Pattern

Rectangle chart pattern

The Rectangle Pattern is a widely observed chart formation in technical analysis. It signals a period of price consolidation, where the market takes a pause after a strong move and trades within a defined range before continuing in the same direction. The pattern forms a rectangular shape on the chart as price bounces between a horizontal support and resistance level.

This pattern reflects the natural tug-of-war between buyers and sellers as they reassess the next move. Traders often look for this pattern because it offers clear entry and exit points, making it one of the easiest continuation patterns to understand and trade.



Structure of the Rectangle Pattern

  1. Upper Resistance Line

  • The upper boundary of the rectangle is where the price repeatedly reaches but struggles to move above.
  • This happens because sellers become active at this level, entering the market and pushing the price down.
  • Every time the price reaches this line, it faces selling pressure, which prevents further upward movement temporarily.
  • The resistance line reflects a psychological price ceiling where traders decide to lock in profits.

      2.Lower Support Line

  • The lower boundary is where the price repeatedly falls but finds buying support and bounces back.
  • Buyers view this price level as an attractive entry point, stepping in to prevent the price from declining further.
  • Every time the price drops to this area, it finds support, suggesting that demand is strong enough to counteract selling pressure.
  • This line represents a psychological price floor where traders believe the asset is undervalued.

      3.Consolidation Phase

  • Between the support and resistance levels, the price oscillates, moving sideways without a clear trend.
  • This phase shows uncertainty in the market as buyers and sellers battle for control.
  • Neither group dominates, which causes price to move within the rectangle rather than trending upward or downward.
  • It’s during this phase that traders carefully observe the market, preparing for a breakout.

      4.Breakout

  • After spending some time within the rectangle, the price eventually breaks out of the defined range.
  • A breakout above the resistance signals that buyers have regained control, and the price is ready to resume the uptrend.
  • Conversely, a breakdown below the support indicates that sellers have overpowered buyers, and the price may continue to decline.
  • Breakouts are usually accompanied by a surge in volume, confirming the strength of the move.
  • Once the breakout happens, traders can target price moves that are often equal to the height of the rectangle added to the breakout point.

Types of Rectangle Patterns

  1. Bullish Rectangle (Uptrend Continuation)
  • Forms during an uptrend.
  • The price moves sideways between two levels.
  • After some time, it breaks above the resistance line.
  • Traders expect the price to continue rising after breakout.
       2.Bearish Rectangle (Downtrend Continuation)
  • Forms during a downtrend.
  • The price consolidates within a horizontal range.
  • Eventually, the price breaks below the support line.
  • Traders expect the downtrend to continue.
How to use it
  • Entry: Enter a trade after the breakout is confirmed (above resistance or below support).
  • Stop Loss: Place just inside the rectangle (to avoid false breakouts).
  • Target: Measured by the height of the rectangle, added to the breakout point (up or down

Example: ICICI Daily timeframe chart



















The ICICI Bank daily chart is a perfect example of how the rectangle pattern plays out in real-world markets. Recognizing this pattern helps traders avoid false moves and confidently prepare for trend continuation. Watching the breakout along with volume provides a reliable way to make informed trading decisions.

The chart shows a strong uptrend where the price rose from around ₹1,250 to above ₹1,430. After this sharp move, the price entered a consolidation phase, forming a rectangle pattern between the resistance near ₹1,450 and support around ₹1,400. During this period, the price bounced between these levels multiple times, indicating a pause as buyers and sellers were evenly matched. Volume was high during the initial rally but declined during the consolidation, reflecting market hesitation. A breakout above the resistance level with increased volume would confirm that buyers are ready to push the price higher again. Traders can use the rectangle’s height, approximately ₹50, to set a price target around ₹1,500. At the same time, placing a stop-loss below ₹1,400 helps manage risk in case the breakout fails. This rectangle pattern highlights how the market takes a temporary pause before resuming its previous trend, offering traders clear levels to plan their entries, exits, and risk management

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