Continuation Technical Form - Rectangle (Box)

1. What is a box pattern?

The rectangle pattern is also called the box pattern. As the coin fluctuates, a price wave forms, with all the peaks at the same height, and all troughs at the same height. We connect peak to peak and then trough to trough, then we can get a rectangle-shaped pattern.

2. How to identify box pattern

1. It often appears in the middle of a rising or falling trend, but seldom shows at the bottom or top of the trend.

1. The coin price moves up and down between two sides of a box.

1. Trading volume: Trading volume increases when the price rises and shrinks when it falls. The overall trading volume gradually shrinks as a general trend.

1. The box pattern forms as it is pieced at the upper or lower line. Whether the price goes up or down while crossing the box also indicates the direction in which the market will move thereafter.

1. An effective crossing refers to a breakthrough of more than 3% of the sideline.

   3. What are the technical indications of the box?

For the rectangles that appear in the rising trend, in most cases, they will be broken at the upper line. So the crossing of the pattern is a sign of a rising trend, suggesting the investors go long.

For the rectangles that appear in the falling trend, they will be generally pieced at the bottom line. So the crossing of the pattern is a sign of a downward trend, suggesting the investors go short.

4. Application

1. For the rectangles that appear in the rising trend, in most cases, they will be broken at the upper line. So the crossing of the pattern is a sign of a rising trend, suggesting the investors go long.

1. For the rectangles that appear in the falling trend, they will be generally pieced at the bottom line. So the crossing of the pattern is a sign of a downward trend, suggesting the investors go short.

5. Use in trading

1. If the coin price breaks the upper line of the box pattern, a bullish market can be expected:

The picture above is the 4 hours chart of the Gate.io contract BTC/USDT. During the period from September 19, 2021, to October 1, 2021, BTC fell from $48,000 to $40,000 and then fluctuated in the range of $40,650-44,670 where a box pattern formed. After the price went up to break the upper line of the box at US$44,670, it started a new round of strong rises, soaring up to as high as $66,000, with an increase of 47.7%.

1. After the coin price breaks through the lower line of the box, a bearish market is expected:

The picture above is the 4-hour chart of the Gate.io contract BTC/USDT. From May 19, 2022, to June 11, 2022, BTC dropped sharply from $39,000 to $26,000 and then fluctuated back and forth between $28,000 and $32,000 forming a box pattern. After the price dropped to break the lower line of the box at $28,500, it started to crumble to as low as around $18,000, with a drop of more than 40%.

6. Summary

There is a chance for the box pattern to show up at the top or bottom of the chart. The one that appears on the top can be regarded as a dome, and the one that shows up at the bottom can be regarded as a round bottom. If a box appears in such positions, it is very likely that a pattern indicating a reversal trend will show up.

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Disclaimer

This article is for informational purposes only and does not constitute any investment advice, nor is Gate.io responsible for any of your investments. Content related to technical analysis, market judgment, trading skills, and traders’ sharing cannot be used on an investment basis. Investment may involve potential risks and face uncertainties. This article does not contain or imply any guarantee for returns on any type of investment.