# Rectangles

> A rectangle is a horizontal range between parallel support and resistance. Learn how to trade inside it, how to trade the breakout and how to measure targets.

Source: https://learn.tradelabsai.com/chart-patterns/rectangles/  
Track: Chart Patterns · Level: Intermediate · Updated: 2026-10-03  
Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice.  
Cite as: TradeLabs Learn, "Rectangles", https://learn.tradelabsai.com/chart-patterns/rectangles/

A rectangle is a chart pattern where price moves sideways between two horizontal, parallel lines: a resistance level on top and a support level below. It is the formal chart pattern name for a trading range. Rectangles can be continuation patterns, pausing within a trend before it resumes, or reversal patterns, marking the end of a trend. Either way, they offer two kinds of trades: range trades inside the box and breakout trades when price leaves it.

## Anatomy

*Figure: Price rotates between flat support and resistance until it breaks out.*

| Feature | Description |
|---|---|
| Upper line | Horizontal resistance, at least two touches |
| Lower line | Horizontal support, at least two touches |
| Shape | Parallel, flat lines |
| Volume | Often fades during the range, rises on the breakout |
| Outcome | Breakout in either direction |

## Continuation or reversal?

| Context | Interpretation |
|---|---|
| Rectangle after a strong uptrend, breaks up | Bullish continuation: the trend paused and resumed |
| Rectangle after a strong uptrend, breaks down | Reversal: distribution at the top |
| Rectangle after a downtrend, breaks down | Bearish continuation |
| Rectangle after a downtrend, breaks up | Reversal: accumulation at the bottom |

Rectangles break in the direction of the prior trend somewhat more often, but not reliably enough to trade without confirmation. Volume behaviour during the range and the character of the tests can offer clues: for example, rallies to resistance on rising volume and dips to support on falling volume hint at accumulation. See [Wyckoff Method](https://learn.tradelabsai.com/smart-money/wyckoff-method/).

## Trading inside the rectangle

- **Buy near support, sell near resistance,** with stops just beyond the lines.
- **Wait for a reaction** at the edges, such as a rejection candle, rather than buying blindly.
- **Avoid the middle;** reward and risk are both poor there.
- **Target** the opposite edge or the midpoint.

See [Range Trading](https://learn.tradelabsai.com/strategies/range-trading/).

## Trading the breakout

1. **Wait for a close** beyond support or resistance, ideally with rising volume.
2. **Enter** on the close or on a retest of the broken line. See [Role Reversal and Retests](https://learn.tradelabsai.com/price-action/role-reversal-and-retests/).
3. **Stop** back inside the rectangle, often near its midpoint or beyond the last swing.
4. **Target** using the measured move: the rectangle's height added to the breakout level (or subtracted, for a downside break).

**Example: A rectangle continuation**
A stock rallies from $50 to $70, then spends five weeks between $66 and $71. It breaks above $71, closing at $71.80 on volume twice its average. The rectangle's height is $5, so the measured target is $76. A trader buys on a retest at $71.30 with a stop at $69.20, inside the range, risking $2.10 for about $4.70.

## False breakouts

Rectangles are prone to false breaks: price pokes beyond a line, triggers stops and breakout orders, then returns inside. The longer and more obvious the rectangle, the more stops sit just outside it. Requiring a close beyond the line, volume confirmation or a retest helps filter these. A clear failure can be traded back towards the opposite edge. See [Failed Breakouts and False Breaks](https://learn.tradelabsai.com/price-action/failed-breakouts/).

## Rectangles vs other patterns

- With three clear tests of one edge followed by a break of the other, a rectangle can also be read as a triple top or bottom. See [Triple Top and Triple Bottom](https://learn.tradelabsai.com/chart-patterns/triple-top-and-triple-bottom/).
- When the range is small and follows a sharp move, it is more like a flag. See [Bull and Bear Flags](https://learn.tradelabsai.com/chart-patterns/bull-and-bear-flags/).

## Common mistakes

- **Expecting every touch to bounce** after many tests have worn the level down.
- **Trading breakouts on wicks.**
- **Ignoring the trend before the rectangle.**

## Frequently asked questions

### What is a rectangle pattern?

A trading range where price moves between horizontal support and resistance, eventually breaking out in one direction.

### Is a rectangle bullish or bearish?

Neither by itself. It is a pause; the breakout direction, often the same as the prior trend, decides the outcome.

### How do you calculate a rectangle target?

Add the height of the rectangle to the breakout level for an upside break, or subtract it for a downside break.

Next, learn a popular bullish base: the [Cup and Handle](https://learn.tradelabsai.com/chart-patterns/cup-and-handle/).

## Continue learning

- Next lesson: [Cup and Handle](https://learn.tradelabsai.com/chart-patterns/cup-and-handle/)
- Previous lesson: [Pennants](https://learn.tradelabsai.com/chart-patterns/pennants/)
- Related: [Pennants](https://learn.tradelabsai.com/chart-patterns/pennants/): A pennant is a small symmetrical triangle after a sharp move that usually signals continuation. Learn how to identify pennants, trade the breakout and set targets.
- Related: [Range Structure and Consolidation](https://learn.tradelabsai.com/price-action/consolidation/): Consolidation is when price moves sideways between support and resistance. Learn to identify ranges, trade them, spot breakouts and avoid range traps.
- Related: [Range Trading](https://learn.tradelabsai.com/strategies/range-trading/): Range trading buys near support and sells near resistance while price moves sideways. Learn how to identify ranges, time entries and exit when a range breaks.
- Related: [Breakouts](https://learn.tradelabsai.com/price-action/breakouts/): A breakout is when price moves decisively beyond support, resistance or a pattern. Learn signs of a real breakout, entry methods, stops and how to avoid fakeouts.
- Related: [Failed Breakouts and False Breaks](https://learn.tradelabsai.com/price-action/failed-breakouts/): A failed breakout is when price breaks a level then quickly returns. Learn why fakeouts happen, how to confirm them and how to trade the trapped traders' reversal.
- Related: [Support and Resistance](https://learn.tradelabsai.com/price-action/support-and-resistance/): Support is where buying tends to stop a fall; resistance is where selling tends to stop a rise. Learn to draw levels, judge their strength and trade them well.
- Related: [Triple Top and Triple Bottom](https://learn.tradelabsai.com/chart-patterns/triple-top-and-triple-bottom/): Triple tops and bottoms are reversal patterns with three failed tests of one level. Learn how they form, how to confirm the breakout and how they differ from ranges.