As of 08/20/2019
  Indus: 25,962 -173.35 -0.7%  
  Trans: 10,006 -75.35 -0.7%  
  Utils: 834 -1.95 -0.2%  
  Nasdaq: 7,949 -54.25 -0.7%  
  S&P 500: 2,901 -23.14 -0.8%  
YTD
 +11.3%  
 +9.1%  
 +17.0%  
 +19.8%  
 +15.7%  
  Targets    Overview: 08/15/2019  
  Up arrow27,200 or 24,900 by 09/01/2019
  Up arrow10,700 or 9,550 by 09/01/2019
  Up arrow850 or 790 by 09/01/2019
  Up arrow8,200 or 7,400 by 09/01/2019
  Up arrow3,000 or 2,750 by 09/01/2019
As of 08/20/2019
  Indus: 25,962 -173.35 -0.7%  
  Trans: 10,006 -75.35 -0.7%  
  Utils: 834 -1.95 -0.2%  
  Nasdaq: 7,949 -54.25 -0.7%  
  S&P 500: 2,901 -23.14 -0.8%  
YTD
 +11.3%  
 +9.1%  
 +17.0%  
 +19.8%  
 +15.7%  
  Targets    Overview: 08/15/2019  
  Up arrow27,200 or 24,900 by 09/01/2019
  Up arrow10,700 or 9,550 by 09/01/2019
  Up arrow850 or 790 by 09/01/2019
  Up arrow8,200 or 7,400 by 09/01/2019
  Up arrow3,000 or 2,750 by 09/01/2019

Bulkowski's Rectangle Tops

 

Statistics updated on 1/18/19.

For more information on this pattern, read Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book., pictured on the right, pages 579 to 594.

If you click on the above link and then buy the book (or anything) while at Amazon.com, the referral will help support this site. Thanks.

-- Tom Bulkowski

$ $ $

Rectangle tops (or horizontal channels), so called because price enters the pattern from the bottom (creating a top).

 

Score your pattern
for performance

Rectangle top chart pattern

Rectangle Top Chart Pattern

Rectangle Tops: Important Bull Market Results

Overall performance rank for up/down breakouts (1 is best): 30 out of 56/38 out of 53
Break even failure rate for up/down breakouts: 15%; 34%
Average rise/decline: 51%; 13%
Throwback/pullback rate: 66%; 64%
Percentage meeting price target for up/down breakouts: 78%; 54%

The above numbers are based on more than 500 perfect trades. See the glossary for definitions.

Rectangle Top: Identification Guidelines

CharacteristicDiscussion
Price trendUpward leading to the chart pattern.
ShapePrices have flat tops and flat bottoms, crossing the pattern from side to side following two parallel trendlines.
TrendlinesTwo near horizontal trendlines bound price action.
TouchesPrice should touch one trendline at least three times and twice on the other trendline, using distinct peaks and valleys, but be flexible.
Volume trendTrends downward 70% of the time.
BreakoutUpward 63% of the time.

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Rectangle Top: Trading Tips

Trading TacticExplanation Rectangle top measure rule
The Measure Rule
Measure ruleCompute the height between the two trendlines (A and B in the measure rule figure to the right) and then multiply it by the above 'percentage meeting price target.' Add it to the price of the top trendline (B, upward breakouts) or subtract it from the bottom trendline (A, downward breakouts) to get a target price (C).
Wait for breakoutSince the breakout can be in any direction, wait for price to close outside the trendline before taking a position.
Intrapattern tradeIf the rectangle is tall enough, buy at the bottom trendline and sell at the top one, then reverse the trade.
HeightTall patterns perform better than short ones.
Yearly lowRectangles, regardless of the breakout direction, perform best when the breakout is within a third of the yearly low.
Partial rise/declineA partial rise predicts a downward breakout 75% of the time; a partial decline correctly predicts an upward breakout 79% of the time.
ThrowbacksThrowbacks hurt post breakout performance.

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Rectangle Top: Example

Rectangle top chart pattern example

The above figure shows an example of a long rectangle top chart pattern. Price bounces between two parallel trendlines for what seems like forever, but it creates a strong move upward when price finally pierces the top trendline.

-- Thomas Bulkowski

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Other Rectangle Top Examples

See Also

 

Support this site! Clicking any of the books (below) takes you to Amazon.com. If you buy ANYTHING while there, they pay for the referral.

My novels:      New                  Bumper's Story Head's Law

Chart Patterns: After the Buy Getting Started in Chart Patterns, Second Edition Trading Basics Fundamental Analysis and Position Trading Swing and Day Trading Visual Guide to Chart Patterns Encyclopedia of Candlestick Charts Encyclopedia of Chart Patterns 2nd Edition Trading Classic Chart Patterns

Copyright © 2005-2019 by Thomas N. Bulkowski. All rights reserved.
Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.
Some pattern names are registered trademarks of their respective owners.

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