A bearish rectangle is a continuation chart pattern.
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It appears after a decline, when price spends some time moving between horizontal resistance and horizontal support.
The pattern is confirmed when price breaks below support, signalling that the decline is resuming.
How do you recognise a bearish rectangle?
- The market is in a downtrend
- Horizontal resistance blocks several attempts to rise
- Horizontal support is tested several times
- Price stays between these two levels
- The break below support confirms the pattern
The bullish rectangle works the other way round.
How do you trade it?
The break below support gives the sell signal.
You can enter after confirmation below this level.
The stop-loss can go above the rectangle's resistance.
To calculate the price target, measure the height of the pattern and project that distance below support.
