Now that we are experts at identifying minor highs and lows, drawing trendlines, and knowing what support and resistance look like, let us begin by finding our first chart pattern: a rectangle.
Think of a rectangle as a sewer pipe snaking through a construction site. It has a flat top and flat bottom, and price is a rattlesnake winding its way through the pipe. Exhibit 7.1 shows an example of a rectangle bottom.
After trending downward, the stock bumped up against an invisible ceiling of overhead resistance and stood on a floor of underlying support from October to December, forming a rectangle bottom.
That ceiling and floor I show ...