What is a bearish rectangle pattern?

The bearish Rectangle pattern is a bearish continuation pattern. This means a downwards breakout of this pattern will likely signal a stock crash.

In this pattern the stock after falling consolidated between 2 levels. This forms a rectangular shape (hints the name). After a while it breaks below support. This gives a bearish sell signal.

volume High volume is needed to confirm a breakout. Breakouts with low volume could be a false alarm.

Target The target for a Rectangle pattern is found by subtracting the difference between the top of the pattern by the bottom of the pattern and subtracting that from the bottom.

In this pattern the patterns top is at $18. Its bottom is at $11. So we would expect a $7 move. $11-$7= $4 would be our target for this pattern. It did fall a large amount and actually overshot the pattern by a little going to $3.

Trading the pattern Professional traders may choose to short the stock when it breaks support and place a stop above old support.

Chart Patterns