As of 11/01/2024
Indus: 42,052 +288.73 +0.7%
Trans: 16,351 +99.18 +0.6%
Utils: 1,019 -17.89 -1.7%
Nasdaq: 18,240 +144.77 +0.8%
S&P 500: 5,729 +23.35 +0.4%
|
YTD
+11.6%
+2.8%
+15.6%
+21.5%
+20.1%
|
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 11/01/2024
Indus: 42,052 +288.73 +0.7%
Trans: 16,351 +99.18 +0.6%
Utils: 1,019 -17.89 -1.7%
Nasdaq: 18,240 +144.77 +0.8%
S&P 500: 5,729 +23.35 +0.4%
|
YTD
+11.6%
+2.8%
+15.6%
+21.5%
+20.1%
| |
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.
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Rectangle Bottom Chart Pattern
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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 (5-touch 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
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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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