A rectangle, also known as a trading range or a congestion area, represents a pause in a trend as prices move sideways. Like other continuation patterns, after the rectangle has been formed, prices continue in the direction of the market trend that preceded its formation. Below is an example:

Rectangles are usually continuation patterns but you still have to be alert for signals of a reversal pattern.

Rectangles enable traders to trade the swings within the pattern, buying dips and selling rallies. They take about 1-3 months to form and complete.