A rectangle pattern is:

Horizontal consolidation. It is a sideways range.

A breakout target is:

The range height projected. Project the rectangle height.

False breakouts. Many breakouts fail.

Rectangles and Trading Ranges

Horizontal consolidation between support and resistance.

A rectangle forms when price bounces between a horizontal support and resistance. It shows balance. A breakout beyond either side signals the next move.

You can trade the range (buy near support, sell near resistance) or trade the breakout. The range is only tradable while it holds.

The target after a breakout is the height of the rectangle projected from the break. False breakouts are frequent, so require a close and a retest.

Key takeaways

Horizontal support and resistance
Trade the range or the breakout, not both at once
Target = rectangle height

Quiz

A rectangle pattern is: Answer: Horizontal consolidation. It is a sideways range.
A breakout target is: Answer: The range height projected. Project the rectangle height.
A common problem is: Answer: False breakouts. Many breakouts fail.

Educational content, not financial advice.