Definition
A rectangle pattern, sometimes called a trading range or congestion area, forms when price moves sideways between two roughly horizontal lines: a resistance line connecting the highs and a support line connecting the lows. Price bounces back and forth between these boundaries, touching each at least twice.
The rectangle represents a pause in which buyers and sellers are evenly matched. It is a period of indecision that resolves only when one side gains control and price breaks decisively through one of the boundaries.
Why it matters
How it works
A valid rectangle requires price to touch each boundary at least twice, confirming that the lines are meaningful. While inside the range, traders may buy near support and sell near resistance, since the boundaries are expected to hold.
The decisive event is the breakout. When price closes beyond a boundary, often on rising volume, the rectangle is resolved. The measured-move target is found by adding the rectangle's height to the breakout point. Partial declines and partial rises inside the range can hint at the eventual breakout direction.