As of 11/08/2024
Indus: 43,989 +259.65 +0.6%
Trans: 17,354 +143.48 +0.8%
Utils: 1,032 +20.02 +2.0%
Nasdaq: 19,287 +17.32 +0.1%
S&P 500: 5,996 +22.44 +0.4%

YTD
+16.7%
+9.2%
+17.0%
+28.5%
+25.7%

43,100 or 41,250 by 11/15/2024
16,800 or 15,700 by 11/15/2024
1,075 or 1,000 by 11/15/2024
19,000 or 17,600 by 11/15/2024
5,900 or 5,600 by 11/15/2024

As of 11/08/2024
Indus: 43,989 +259.65 +0.6%
Trans: 17,354 +143.48 +0.8%
Utils: 1,032 +20.02 +2.0%
Nasdaq: 19,287 +17.32 +0.1%
S&P 500: 5,996 +22.44 +0.4%

YTD
+16.7%
+9.2%
+17.0%
+28.5%
+25.7%
 
43,100 or 41,250 by 11/15/2024
16,800 or 15,700 by 11/15/2024
1,075 or 1,000 by 11/15/2024
19,000 or 17,600 by 11/15/2024
5,900 or 5,600 by 11/15/2024
 
Trading lessons added 6/13/24.
For more information on this pattern, read Encyclopedia of Chart Patterns, 3rd Edition. If you click on the link and then buy the book (or anything) during the visit at Amazon.com, the referral will help support this site. Thanks.
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Rectangle bottoms, so called because price enters the pattern from the top, are good performing chart patterns. The performance rank is near the top of the list.


Rectangle Bottom Chart Pattern

The above numbers are based on more than 900 of perfect trades. See the glossary for definitions.
Characteristic  Discussion 
Price trend  Downward leading to the chart pattern. 
Shape  Prices have flat tops and flat bottoms, crossing the pattern from side to side following two parallel trendlines. 
Trendlines  Two near horizontal trendlines bound price action. 
Touches  Price should touch one trendline at least three time and the other trendline twice (5touch minimum) using distinct peaks and valleys. 
Volume trend  Trends downward at least 71% of the time. 
Breakout  Upward 59% of the time. 
Trading Tactic  Explanation 
The Measure Rule

Measure rule  Compute 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 (A, upward breakouts) or subtract it from the bottom trendline (B, downward breakouts) to get a target price (C).  
Wait for breakout  Since the breakout can be in any direction, wait for price to close outside the trendline before taking a position.  
Intrapattern trade  If the rectangle is tall enough, buy at the bottom trendline and sell at the top one, then reverse the trade.  
Height  Tall patterns with upward breakouts perform substantially better than short ones.  
Volume trend  Rectangles with a rising volume trend outperform regardless of the breakout direction.  
Yearly low  Rectangles with breakouts (up or down) near the yearly low perform best.  
Partial rise/decline  A partial rise predicts a downward breakout 75% of the time; a partial decline correctly predicts an upward breakout 77% of the time.  
Throwbacks and pullbacks  Throwbacks and pullbacks hurt post breakout performance. 
The above figure shows an example of a rectangle bottom chart pattern. Price bounces between two parallel trendlines. Few chart patterns are perfect and the one shown has price peaking out the top at B. A pullback at A allows traders that own the stock another opportunity to exit a position before the downtrend resumes.
I present the information in slider format, so be sure to click the left or right arrows to view another slide.
 Thomas Bulkowski
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