Technical Analysis Plain and Simple: Charting the Markets in Your Language, Second Edition

Rectangles

A rectangle pattern is simply a region bound by a support line on the bottom and a resistance line on the top. The market trades up and down between these two levels for a number of periods, depending on the type of chart being used (daily, weekly, five–minute, or any other time frame). Rectangles are also called trading ranges, and the lessons of support and resistance aptly describe what is happening within.

Figure 9.1 shows Simon Property Group in early 2002 in a well–defined rectangle pattern. After the third rally to the 34.50 area, the stock pulled back only slightly to hint that the bulls were staying active. This presaged the breakout a few days later. Note that the stock rallied by approximately the same amount as the trading ...