Both the bullish and bearish Rectangle patterns looks the same. However, they appear in different trend context.
A Rectangle chart pattern indicates sideways action.
When the market enters in a congestion phase, it is likely to break out in the direction of the preceding trend.
HOW TO TRADE WITH RECTANGLE PATTERN
Remember that the trend before the Rectangle chart pattern determines if the pattern is bullish or bearish. A Rectangle pattern continues the prior trend.
- On break-out above the resistance line; or
- On pullback to the resistance line (now acting as support) after the break-out.
For a bearish pattern, sell:
- On break-out below the support line; or
- On pullback to the support line (now acting as resistance) after the break-out.
For the target objective, measure the height of the Rectangle and project it from the break-out point.