What
A box is sideways price between a level above and a level below, held for many bars. The level above is resistance, the level below is support, and price moves between them without breaking either. The longer the box lasts and the more times each edge is touched, the clearer it is on the chart.Read
Compression before expansion. A box is often read as a market building up to a move: the longer price is held in a range, the larger the move traders tend to expect when it leaves. The breakout direction is not known in advance. A box says that a move may be coming. It doesn’t say which way.Watch
Watch for a close outside the box, then the retest of its edge. A wick that pokes outside and closes back inside is usually read as a failed break. A close outside, followed by price coming back to the edge it broke and holding there, is the classic breakout reading. The box height is a common measure for the move that follows. Traders often take the distance between the two edges and project it from the edge that broke, as a rough target for the move. It is a rule of thumb, not a guarantee. For example, price has moved between a ceiling and a floor for most of a session. It then closes above the ceiling, dips back to touch it and turns up from it. Traders often read the dip as the retest, and measure one box height above the ceiling as a first target. If price falls back inside the box instead, the break has failed.Caveat
Most one-minute breakouts are noise. On a fast chart, price pokes out of boxes constantly and comes straight back. A box built over hours or days carries more weight than one built over a few minutes. A box describes where price has been held. It doesn’t predict where price will go when it leaves.Related
- Support and resistance: a price area where the market has turned more than once.
- Trendline: a line through swing lows or swing highs, extended to the right.
- Channel: a trendline with a parallel line on the other side.