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Tutorial on Rectangle Channel Chart Pattern

Channel Basics   Channel Ascending   Channel Descending

What is Rectangle Channel Chart Pattern?

It is also known as Neutral Channel pattern. It consist of two trendline parallel to each other having points forming equal highs and equal lows, thus forming a rectangular or box shape. The price is confined between the two trendlines. It consist of the following:
a. Horizontal Upper Trendline: Also known as the main trendline or primary trendline. It is called so because it is the one which determines the trend. It should have atleast two consecutive points forming equal highs. More point is the indication of more strength in the pattern. The main trendline acts as a resistance in descending Channel pattern.
b. Horizontal Lower Trendline: Also known as the channel line or secondary trendline. This is drawn in parallel to the main trendline. It serves as an support in this pattern. It should also have a minimum of 2 consecutive equal lows point. More points indicates more strength in the pattern.

Rectangle Channel Chart Pattern Sample Breakout

This pattern is formed when there is a tough competition between the bulls and the bears, no body is ready to give up resulting in equal highs and equal lows. That is why this pattern is also known as consolidation zones.

Breakout: It can occur in any direction upside or downside. If the breakout is in upside direction, it indicates that the bulls have taken over bears and indicates a buy signal. However if the breakout is in downside direction it indicates selling pressure or victory of bears over bulls and indicates a sell signal.
Volume: For a rectangular channel pattern there is no such standard trend for the volume. It can be increasing, decreasing, neutral or high then low or vice verse. However there is a increase in volume with an upside breakout and there is an decrease in volume with a downside breakdown.
Price Target: One can roughly put a price target after a breakout, and it should be the height of the channel, however other indicators have to considered as well like MACD, Relative Strength Indicator (RSI), etc,. In the case of upside breakdown, one can put the price target upwards and can put downwards in case of downside breakout.
Duration: Channel pattern Formation takes from a few weeks to many months. Longer the duration are considered to be more reliable than the short duration one.

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Total Comments 4

User Comments
Posted by Guest
Posted on: 26-Oct-2013
I have purchase 5000 shares of Balmer Lawrie and Co. @ 345/- per share. I also received dividend of 17.60/- per share. Now what can i do . please helpful to me.

Posted by Guest
Posted on: 18-Oct-2013
I HAVE PURCHASED 5000 SHARES OF BALMER LAWRIE AND COMPANY @ Rs. 345/- per share. I received dividend of Rs. 17.60/- per share. Now what can i do for this stock. If you suggest to long term hold than i hold for long term .

Posted by Trendy
Posted on: 18-Oct-2013
I didnt see much happening in this stock since last four months. Recently on 17/10/2013 it has broken bollinger band support also, indicating a bearish continuation for this stock, I think its time to stay away and watch the stock for positive bullish signal.

Posted by Guest
Posted on: 17-Oct-2013

(All analysis is based on End of Trade day's Value. Expected time of update is between 5 to 5.30 PM exchange time Zone)

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