What it looks like
A horizontal box: at least two swing highs at a flat ceiling and at least two swing lows at a flat floor. The pattern completes when a candle closes below the floor. The height of the box is the distance from floor to ceiling.
What it means
The market was balanced inside the box. Each touch of the floor gathered buy orders and stops beneath it. When price closes below the floor, sellers have won the balance and buyers' stops below the box can push price further. The more touches, the more traders are watching the break.
How to trade it
- 1
Draw the ceiling and floor through at least two touches each.
- 2
Confirmation: a candle closes below the floor.
- 3
Entry: sell the close, or a retest of the floor from below that fails.
- 4
Stop: back inside the box, above the floor. Example on US30: box from 46,900 to 47,100, close below at 46,880. Sell at 46,880, stop at 46,960, an 80 point risk.
- 5
Target: the box height (200 points) below the break, about 46,700.
A close back inside the box.
Where it works best
When a range forms after a fall, so the breakdown continues the earlier move, and at session opens on indices and gold.
WickSpeak finds rectangle breakdowns automatically and labels them on the candles that made them. Each note covers what it is, how to trade it and that a close back inside the box proves it wrong. In Playbook you can use it as a condition in a play, alone or alongside other patterns and indicators (any of the 146 patterns can be a condition), and backtest it on past candles with your own costs.
Common mistakes
- Selling a wick through the floor without a close.
- Trading a box with only single touches on each side.
- Selling straight into a major support level just below the floor.
Related patterns
Questions traders ask
What is a rectangle breakdown?
A close below the flat floor of a range that has been tested at least twice on each side. It shows sellers winning a period of balance.
Where should the stop go?
Back inside the box, above the floor. Some traders use the middle of the box for more room.
What is the target of a rectangle breakdown?
The height of the box, measured down from the break.
What if price comes back into the box?
A close back inside the box proves the breakdown wrong. A failed breakdown like that is often called a bear trap.