What it means
A rectangle forms when price oscillates between two parallel horizontal levels — support below, resistance above — for an extended period (weeks to months). Volume typically declines through the range. Breakout direction is roughly 50/50 statistically; the bias comes from the larger trend context (continuation rectangles usually break with the prior trend).
Why it matters
Rectangles are some of the most tradeable patterns BEFORE the breakout — range traders buy support and sell resistance with tight stops just outside the range. The pre-breakout edge is more reliable than the breakout itself, which is often a coin-flip on direction.
How to use it
Inside the range: buy near support, sell near resistance, stop just outside the range edge. Wait for daily close beyond the range edge with volume expansion before treating breakout as confirmed. Target on breakout = range height projected from breakout.
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