Rectangle (Trading Range)
Also called: trading range, channel, consolidation box
A sideways range between roughly parallel horizontal support and resistance, where price oscillates until it breaks out.
A rectangle forms when price bounces repeatedly between a flat ceiling (resistance) and a flat floor (support), with neither side winning. Each touch that holds reinforces the level; range traders buy support and sell resistance while the box lasts.
The decisive move is the breakout — a close beyond either boundary on rising volume — which projects a target of the box's height. A rectangle after an uptrend that breaks up is a continuation; one that breaks down can reverse it.
On StockSetups
A rectangle that breaks to the upside shows up on StockSetups' board as a breakout from a base, with the box's support and resistance drawn on the chart.
Related terms
See rectangle (trading range) on tonight's board.
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