Below is a slider quiz to test your ability to identify rectangle tops and trade them. Captions appear below the pictures in red for guidance, so be sure to scroll down far enough to read them.
1 / 7
This is a good example of a rectangle top, even though it doesn't perform that well. Price trends upward into the pattern (A), and that distinguishes it from a rectangle
bottom. The rectangle top is at B. Price moves horizontally and crosses the pattern from top to bottom and back again, touching each trendline at least 3 times (optimally but a minimum of 5
is a good benchmark). In this example, price make a partial decline at C, correctly predicting an upward breakout, which happens at D. The breakout can
be any direction but is upward 63% of the time. Volume trends downward 70% of the time, too. This rectangle has an upward volume trend (E).
This shows a rectangle bottom at B (B is in the middle of a longer-term downtrend) and the rectangle top is at A. B isn't a good example of a rectangle bottom
because it's too short and doesn't have as many touches as I like to see. It's more of a knot of congestion than a rectangle, I think.
4 / 7
Find as many rectangle tops as you can.
5 / 7
Here they are, A and B. Rect A looks loose. B looks tight. Tight patterns often perform better than loose ones (I tested this on high and tight flags I think).
Regardless, B looks better than A.
6 / 7
The rectangle top is in red on the far right top of the chart. It has a downward breakout at A. How far will price drop? Pick one of the green lines.
7 / 7
The rectangle top is in red. Price drops to line 2 before recovering.