# Bearish Rectangle Chart Pattern

In this lesson we shall discuss the following:

1.What is a bearish rectangle pattern?

2.How to identify a bearish rectangle?

3.How to trade a bearish rectangle?

### What is a bearish rectangle pattern?

During a strong downtrend period, the price pauses and gives rise to continuous rectangle patterns.

There is temporary bounce in price between two parallel levels before the trend continues.

Selling opportunity: The bearish rectangle pattern can be used for possible selling opportunities.

### How to identify the bearish rectangle?

The chart below is an illustration of a bearish rectangle.

Number 1: Resistance line

Number 2: Support line

From the above chart we can see the following:

In a strong downtrend, the price falls and then begins to stabilize between support and resistance levels.

The name Bullish rectangle is derived when the price moves sideways, bouncing between these two parallel lines forming a box-like shape.

Break out of the price through the lower support level occurs and its downtrend continues.

### Practice Session

Exercise 1: Identify the bearish rectangle. Show exercise

Exercise 2: Identify the bearish rectangle. Show exercise

### How to trade the bearish rectangle?

We will discuss two methods of trading the bearish rectangle.

Enter the trade

When the candlestick closes below the rectangles lower parallel line (the support level).

Enter the trade with a short sell order.

The chart below is an illustration.

Place the stop loss just above the rectangles upper parallel line (the resistance level).

The chart below is an illustration.

Place the profit target

The height of the rectangle is measured. The profit target is placed the same distance underneath the rectangles lower parallel line.

The chart below is an illustration.

Number 1: Resistance line

Number 2: Support line

Number 3: Area where price has broken support number 2

1 Sell order (short entry)

2 Stop loss

3 Take profit

### Practice Session

Technique 1:

Exercise 1: Where would you place the entry, stop loss and take profit? Show exercise

Trading the bearish rectangle:

### Technique 2

Enter your trade

As same with technique 1, wait for a candlestick to close below the lower parallel line, breaking the rectangles support.

Then, wait for the price to retest the lower line.

The broken support level now turns into a resistance .

Place your stop loss above the rectangles lower parallel line (the old support level that has now turned into a resistance)

As same with technique 1, measure the height of the rectangle and then place your profit target the same distance below the rectangles lower parallel line.

The chart below is an illustration.

Number 1: Old resistance line

Number 2: Support turned resistance

Number 3: Price finds resistance

1 Sell order (short entry)

2 Stop loss

3 Take profit

### Practice session

Technique 2

Exercise 1: Where would you place the entry, stop loss and take profit? Show exercise

### Nut Shell

An overview of the lesson discussed so far…

During a strong downtrend period, the price pauses and gives rise to continuous bearish rectangle patterns.

Bearish rectangles offer a selling opportunity.

Enter: Technique 1: Enter the short trade after the rectangles lower support level has been broken.

Technique 2: Enter after the resistance has been broken and then retested.

### Place the stop loss

Technique 1: Place the stop loss above the rectangle’s upper resistance line.

Technique 2: Place above the lower parallel line once it has turned into a resistance.

Profit Target: Place the profit target the same distance below the rectangles original support level as the distance between the rectangles two parallel lines.