Rectangle

Rectangles are continuation patterns which are characterized by a period of price consolidation in the middle of a strong trend. Rectangles are similar to flags, except that the trend lines that make up the rectangle are horizontal and not diagonal as is the case with flags.

Rectangle forming in the middle of an uptrend
Rectangle forming in the middle of an uptrend

Rectangle forming in the midst of a downtrend
Rectangle forming in the midst of a downtrend

Rectangles represent areas of indecision between buyers and sellers, as the horizontal trend lines are parallel to each other, showing the range-bound status of the asset at that time. A rectangle is simply an indication that supply and demand for the asset is evenly matched and that neither buyers nor sellers are dominating the market. There is slight reduction of market volume, but not as much as in the flags or pennant patterns. Eventually, the asset will continue in the direction of the initial trend.