This is a bullish continuation pattern that forms in uptrend in form of a trading range as price moves up and down the horizontal levels of support and resistance. This indicates that price is likely to continue in its initial trend direction after the completion of the pause.
Price bounces up and down between the horizontal support and resistance line it maintains its highs and lows forming trading range inform of a rectangle. A bullish rectangle pattern is normally seen after a sharp rally of prices in uptrend and a break above the resistance line signals a probable continuation of the trend after consolidation
Take a look at the illustration below;
When price breaks the resistance line above, it shows a continuation in trend direction and this would be the good opportunity to Buy . So entry signal is confirmed above the resistance line after the close of the confirmation candle.To determine the target point, measure the distance between the support line and the resistance line i.e the height of the rectangle and project same distance upwards.
Therefore, your target point from entry point should be equal to the distance between the resistance and support line of the rectangle and your stop-loss slightly below your entry point.
Let’s take a look at the CHFJPY, Daily chart below;
From the CHFJPY, Daily chart above, the confirmation for a Buy signal for continuation is the Break and Close of the candle above the resistance line as shown.
So the Profit target is got by measuring the height of rectangle (H) and projecting that same distance (H) upwards as shown in the chart above. Stop loss is set slightly below the entry-level of the pattern.
How long you should hold an open position, is a personal thing for all traders. The decision is all yours. You know what your goals are as a trader, the kind of strategy you use to trade. All this starts from what you are? and What you want? If I am to answer, this...
- Last Post