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The rectangle

The price swings between a horizontal ceiling and floor. The rectangle shows balance until one side breaks through.

4 min read Last checked: 2026-09-24

The rectangle, also called a trading range, is one of the simplest patterns. Buyers and sellers are in balance and the price runs back and forth between two lines.

What it's about

At the top there's resistance, at the bottom support. Within the range, some buy low and sell high. Others wait for the price to leave one side.

How to recognise it

  • At least two highs at the same level.
  • At least two lows at the same level.
  • The range stays the same width for a longer time.
  • A close outside counts as a breakout.

How the price target is estimated

The height of the rectangle is added to or subtracted from the breakout point. Range from €60 to €64, upside breakout: the target is around €68.

Where it misleads you

Rectangles are notorious for false breakouts. The price pops briefly above the line, triggers buy orders and falls back into the range. So some wait to see whether the price stays above the line for several days.

An example trade with made up numbers

Jan has €10,000 in his account and risks at most €150 per trade. A stock has been swinging between €60 and €64 for months and now closes above. Jan buys at €64.30 and sets his stop loss at €62.30. With that distance, he buys 75 shares for €4,822.50. Costs: €1 each to buy and sell, plus about 2 cents of spread per share on each order.

If it works: The price reaches the target at €68 and Jan sells. Jan is €277.50 ahead. After €2 in fees and €3 in spread, €272.50 is left.

If it goes wrong: The breakout fails and the stop fills at €62.20. That's a €157.50 loss, €162.50 with costs.

Jan put his stop in the middle of the range. If the price falls back there, the breakout has clearly failed.

Rectangleresistancesupportfalse breakoutestimated targetzerotoinvest.com
Rectangle Sketch with made up prices. The price swings between a clear ceiling and floor until it leaves one side.

Summary

  • The rectangle shows balance between buyers and sellers.
  • The target is the rectangle height added to or subtracted from the breakout.
  • False breakouts are especially common with rectangles.

Did you get it?

Range €60 to €64, upside breakout. Where is the target?

Around €68.

What is a false breakout?

The price leaves the range briefly and then falls back into it.

What direction does a rectangle show?

None for sure. It only follows from the breakout.

Sources and further reading

  • StockCharts ChartSchool, Rectangle. View source ↗
  • Thomas N. Bulkowski: Encyclopedia of Chart Patterns, 3rd edition 2021.

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