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Bullish Patterns
Symmetrical Triangles
Ascending Triangles
Rectangles
Pennants
Flags
Wedges
Head & Shoulder Bottom
Cup & Handle
Trendlines

Neutral Patterns
Symmetrical Triangles
Rectangles

Bearish Patterns
Symmetrical Triangles
Descending Triangles
Rectangles
Pennants
Flags
Wedges
Head & Shoulder Top
Trendlines

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Rectangles

Bullish rectangles represent large periods of doubt and indecision. They are characterized by parallel trendlines as the forces of supply and demand are nearly equal. The pattern is typically large and forms either horizontally or with a slight downward slant against the overall uptrend.

Bullish rectangles appear in uptrends and typically resolve themselves to the upside. Breakouts to the upside must be accompanied by a significant increase in volume to confirm the breakout. Failure to accomplish this doesn't automatically render the play invalid, but it does raise a red flag. Besides volume, the astute trader ought to look for a close above the most recent high. This price represents the previous area of selling pressure and an area where stockholders may be looking to “get out even.” It is recommended that if volume does not accompany the break, and if the stock fails to make a higher high within a reasonable amount of time, the trader should move a sell stop up to protect profits.

If the rectangle is large, the expected price movement is approximately equal to the height of the rectangle. If the pattern is on the smaller size, then the expected price movement should mirror the price movement preceding the pattern.

On a side note, rectangles are difficult to play. Symmetrical triangles have converging trendlines, and therefore must break by a certain day. But since rectangles have parallel trendlines – and therefore theoretically can go on for many months - no time horizon is offered as to when the stock will most likely break.




CIG was in a solid uptrend with volume to support the strength when it traded into this bullish downward sloping rectangle pattern. The falling nature of the pattern acts to shake out the weak long positions and cause a little confusion (as evidenced by the lack of volume in June and July. The stock then breaks out and volume surges. It's not an easy trade because the parallel trendlines don't offer any clues as to when the stock will breakout, but following other charting tools (like the high volume bullish engulfing pattern that formed at the bottom of the pattern just before the stock moved up and broke out) will help.



DPH was in steady uptrend when it formed this bullish rectangle pattern. At first the pattern is bullish because the stock is in an uptrend. If the pattern lasts too long (this is subjective) the momentum would be neutralized. Notice the big volume in late February and early March. The first price target is measured by the height of the rectangle. The second target is measured by the move into the pattern.



This is a textbook bullish rectangle pattern. The stock rallied on huge volume in early September. Then the stock traded between parallel trendlines on much lighter volume, and then the stock broke out on another big volume surge. The quick and violent move into the pattern was from about 7 to 11, so it is no surprise the move out of the pattern was also quick and violent and from 10 to 14.


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