When price is bounded by parallel support and resistance levels, a rectangle forms on the chart.

A rectangle represents a period of consolidation or indecision between buyers and sellers as they throw punches at each other but neither has taken control.

Before breaking out, the price will "test" the support and resistance levels several times.

The price may then trend in the direction of the breakout, whether to the upside or downside.

A Rectangle Chart Pattern is a technical analysis tool that forms when the price moves within a horizontal range, bounded by parallel support and resistance levels. This pattern indicates a period of consolidation, where the price fluctuates between these levels without a clear trend direction.

Rectangles can be categorized as continuation or reversal patterns, depending on the breakout direction. If the price breaks above the resistance, it signals bullish momentum. Conversely, a breakout below support indicates bearish movement.

Traders use this pattern to anticipate breakouts, placing buy or sell orders near the breakout point. Stop-loss orders are typically set slightly outside the rectangle’s boundaries. Volume analysis often confirms the breakout's strength, enhancing the pattern's reliability in trading strategies.