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Rectangles

Now that we are experts at identifying minor highs and lows, drawing trendlines, and knowing what support and resistance look like, let us begin by finding our first chart pattern: a rectangle.

Think of a rectangle as a sewer pipe snaking through a construction site. It has a flat top and flat bottom, and price is a rattlesnake winding its way through the pipe. Exhibit 7.1 shows an example of a rectangle bottom.

After trending downward, the stock bumped up against an invisible ceiling of overhead resistance and stood on a floor of underlying support from October to December, forming a rectangle bottom.

That ceiling and floor I show ...

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