Rectangle Chart Pattern - Rectangle Pattern and Chart analysis.

Rectangle Chart Pattern - Rectangle Pattern and Chart analysis

A rectangle chart pattern is characterized as a short-term horizontal channel and represents a trading range and indecision area that is usually resolves in the direction of the main trend. Chart analysis usually consider rectangle pattern as continuation formation but it can also mark significant top and bottom. The rectangle pattern within younger parent trend has more chances to mark a continuation. To estimate the maturity of the parent trend consult technical indicators. Volume should increase on breakout but in contrast with other continuation pattern rectangle does not inherit standard volume behavior. After breakout rectangle pattern resistance may tern into potential support and visa versa.
Tips:
# 1 As continuation pattern rectangle usually appears within the young trend characterizes by natural lomg-term indicators and overbought/oversold daily indicators. Rectangle pattern reset short-term indicators to natural and then continues movement in parent?s direction.
# 2 As reversal formation rectangle appears in mature trend characterized by overbought/oversold indicators on long and short time frames. This situation usually generates divergence on weekly indicators.
# 3 For the best results rectangle chart pattern should be considered together with other technical analysis signals, chart analysis, and technical trading techniques.
Estimated target: the higher level parent?s support/resistance line.