Chartered Market Technician (CMT) Practice Exam 2026 - Free CMT Practice Questions and Study Guide

To validate a rectangle formation, it is essential to understand the significance of touches on the trend lines that define this chart pattern. A rectangle formation, also known as a trading range or consolidation pattern, occurs when the price moves between two parallel horizontal trend lines, with a resistance line above and a support line below.

It is considered validated when there are at least two touches on each of the horizontal trend lines. These touches demonstrate that the market has tested both the support and resistance levels multiple times, suggesting that these levels are significant to traders. The more touches there are on these lines, the more robust the rectangle formation becomes, indicating a higher likelihood that the price will continue to bounce between these levels until a breakout occurs.

Therefore, the requirement of two touches on each trend line helps confirm market consensus around the price levels that act as barriers. This validation is crucial for technical analysis and trading strategies that depend on recognizing chart patterns for potential breakout or reversal scenarios.