Sideway movements are movements where the price is pretty much the same and the changes are only rather small, where the prices change only within a few percentage area. Sideways movements can last anywhere between a week to couple of months and it can substitute a secondary trend. Once the price comes out of the sideways movements, depending on whether the line has moved up or down of the sideways fluctuation area, this should show the direction of the next bigger intermediate price swing. Often the length of the sideways movement is very important – the longer it is the bigger swing is expected.
If the rectangle pattern appears after a clear bear or bull market, primary trend reversal can be expected.
Note that all of the above (this and couple of my previous posts) was pretty much how Charles Dow thought about it. There is a great number of theories about price formations, up & down trends and such and I will be talking about them all soon. I just want to point out that is is one possible way to look at the market and a lot more should be considered than just this.
