Rectangle or Box or Range Pattern
Weekend Learning Thread : Rectangle or Range or Box Pattern
-The pattern is formed within a horizontal support line below and resistance line above.
-Minimum two touches on each side is required for the pattern to be valid.
-It can also be seen as a horizontal channel.
-As shown in the above image, shortfall is seen majority of the times which helps to identify the breakout side.
-For instance, the prices touched the resistance but couldn't come down to support line. This implies the sellers are weak and buyers are pushing the price up.
Best Pattern :
-More the price touches on the lines, better the breakout will be
-Volume decreasing throughout the pattern
-High Volume on breakout
-Pullbacks and throwbacks preferable
How to calculate target :
1. Specific Target (Green)
2. Trailing Stop Loss (Red)
Below is 1hr chart of Cipla
How to trade the pattern :
-This is the simplest pattern to trade
-Once the pattern is formed completely, trade can be taken after a decisive breakout
-Stop loss is taken as the middle point of the two lines
Below is Daily Chart of Cipla
What can go wrong :
-False Breakout
Below is Daily chart of Cipla
Patterns will not be always correct. Respect your stop losses to protect your capital.
Happy trading!