WEBVTT 00:03.600 --> 00:07.940 In this video we'll talk about rectangle tops and bottoms. 00:09.010 --> 00:21.590 So a rectangle top is simply in an uptrend an area where you get lots of choppy action and you can put 00:21.590 --> 00:26.380 two trend lines of form a rectangle and then a break down through that. 00:26.420 --> 00:31.330 This is also known as distribution. 00:31.440 --> 00:37.360 That's because people who have accumulated a stock previously are distributing it to those who are foolish 00:37.360 --> 00:39.520 enough to buy it. 00:39.520 --> 00:48.720 This is where the quote unquote smart money gets out just as a rectangle bottom or accumulation. 00:48.740 --> 00:52.340 And this isn't to say that accumulation can't happen in other shapes. 00:52.340 --> 00:54.110 It's just that that's what this is. 00:54.110 --> 00:59.570 It just happens to be in a rectangle then a rectangle bottom. 00:59.600 --> 01:04.190 We just have the exact opposite value hundreds come in and take over. 01:04.190 --> 01:07.610 So think about what's going on here you've got a trend. 01:07.610 --> 01:15.950 And then suddenly you don't most of the time people will tell you that consolidation which is what that 01:15.950 --> 01:19.090 is leads to continuation in most of the time. 01:19.100 --> 01:22.190 That's true until it isn't. 01:22.190 --> 01:30.800 And then when it isn't it becomes a signal that we're going against the previous uptrend and that something 01:30.800 --> 01:34.870 has changed stop losses are easy. 01:34.880 --> 01:40.100 You can either put him on the other side or in the middle depending on how aggressive you are of the 01:40.190 --> 01:47.990 signal box you're aiming for at least so for it's two dollars high you're aiming for at least two dollars 01:47.990 --> 01:50.060 on a break down below the support. 01:50.060 --> 01:55.150 Quite often though to be honest with you we go much further than that to dollars. 01:55.160 --> 02:02.450 In this case would be your minimum so here we have Kellogg and we had been in an uptrend and you can 02:02.450 --> 02:06.110 see that we ended up forming a rectangle. 02:06.110 --> 02:11.300 We broke down and it was the beginning of something rather negative. 02:11.300 --> 02:18.940 You can measure the rectangle and you can see that we easily hit that and continued to go much further 02:18.950 --> 02:24.380 and in fact this ended up being like a four or five to one type of situation. 02:24.380 --> 02:28.510 So clearly that was an excellent sign. 02:29.910 --> 02:33.220 Here you have a rally and then a pullback. 02:34.600 --> 02:41.460 This pullback would have had people interested in perhaps trying to pick up visa. 02:41.500 --> 02:45.630 You see we have this huge rectangle here. 02:45.730 --> 02:48.400 We couldn't get to the bottom this last time and we broke out. 02:48.400 --> 02:51.520 We retested it for support and continued to go higher. 02:52.430 --> 02:58.720 So this is about as picture perfect as it gets you would take this from the level of the breakout and 02:58.720 --> 03:00.730 you can see we got there rather quickly. 03:00.800 --> 03:09.560 But having said that what's even more interesting about this one is that if you zoom way out you see 03:09.560 --> 03:13.100 that this is a pullback in what had been an up trying to begin with. 03:13.100 --> 03:20.470 So truthfully the trade here was to hang onto it as you can see we continued to go much much much higher. 03:20.510 --> 03:21.740 These are great patterns. 03:21.740 --> 03:27.500 They don't happen all the time but basically think of them as a failed consolidation pattern. 03:27.500 --> 03:32.570 After a move up or down remember failed patterns mean things to.