Rectangular Formation

Formation of a rectangle

Rectangles are more likely to predict the continuation of the earlier trend than its reversal. The formation of the rectangle is determined by horizontal lines routed by two bottoms and tops. Only after establishing these four points can one speak of the formation of a rectangle. Within the formation, the volume of turnover should show a downward trend. Quite often, there are exactly six turning points before the strike within the rectangle.

The buy signal is generated after breaking through the upper edge, the volume must clearly increase (Figure 1). Often, after breaking, there is a correction movement - marked in green.

The sales signal is generated after the bottom edge has been pierced (Fig. 2). The size of the rise or fall in prices after breaking from the rectangle should be at least equal to the height of the formation (see the purple line in the figure).

Strategy 

If you have shares:

• as soon as the formation is established (two peaks and two bottoms, i.e. after the fourth turning point), you can buy near the bottom and sell near the top
• if it breaks down from the formation, sell it immediately
• after breaking up, sell at a break and buy back on a correction
• If you do not have shares:
• in the case of a rectangle after the rise (figure 1), buy at the sixth turning point (6)
• buy only on a correction after breaking up (confirmed by the increase in the volume)

SHARE

Unknown

• 
•