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.
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