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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

Neutral 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 takes several months or more than a year to form.


Rectangles can form in trends, but their sheer size will often neutralize whatever momentum existed when the pattern first started to form. So when an extremely large pattern forms one can never be sure which way it will break until it actually happens. Rarely are any reliable clues given. A trader can only wait until the stock “makes up its mind;” then and only then should money be committed to a position.

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.




ADRX formed a very large neutral rectangle pattern in the second half of '02 that could have broken out either way. A good trader can play the range by buying at support and selling and selling short at resistance. But if this is done, the prudent trader would exit and go the other way if either support or resistance was penetrated.



ADBE was in an uptrend when it started to meander its way sideways in this neutral rectangle pattern. With 3 touches at resistance, 5 touches at support, and sporadic volume within the pattern, the stock could have broken either way. A good trader could play the range while always being ready for a break when one of the trendlines in approached.


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