The rectangle graphical price pattern serves for existing trend confirmation. The bearish version is usually formed in a downtrend and signals the trend’s direction will prevail after its occurrence on the chart.
The rectangle pattern is characterized by two parallel trendlines representing support and resistance levels respectively connecting the most recent lows and highs of the price, holding a certain bunch of price fluctuations within.
The price falling below the support line (plus certain deviation is possible) is considered a sell signal as the level at which the asset has been repeatedly bought is finally overcome.
Following a bearish rectangle pattern formation the price is generally believed to fall at least to its target level, calculated as follows:
T = S – H,
T – target price;
S – support level (pattern’s low);
H – pattern’s height (distance between support and resistance).