Forex Trend Continuation: The Rectangle Pattern

A rectangle continuation pattern resembles a rectangle (as its name implies) formed by two parallel to each other resistance and support lines. The bounded by the two trendlines range, or rectangle, represents a consolidation period in which there is a balance between the supply and demand of a currency. The currency price is moving within this bounded range and is likely to continue its original trend upon breakout. If this doesn't happen a transformation from a trend continuation to a trend reversal pattern will occur.

The height of the rectangle formation, measured from the breakout point, determines the target price.

A bullish rectangle pattern is observed when it is experienced during a bullish trend, where the breakout is on the upside. Accordingly, a bearish rectangle pattern is observed when the consolidation is experienced during a trend of a downward direction and the breakout continues the original trend.

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