Chartered Market Technician (CMT) Practice Exam 2025 – Your All-in-One Guide to Exam Success!

A breakout from a rectangle pattern is signified by the price closing outside the boundary of the pattern. The rectangle pattern, also known as a consolidation or trading range, occurs when the price oscillates between a defined upper and lower horizontal level. When the price closes above the upper boundary or below the lower boundary, it indicates that the prevailing price range has been exceeded, suggesting a shift in market sentiment.

The significance of a price close outside the established limits is that it often leads to increased momentum in the direction of the breakout. Traders usually view this as a signal to enter a position, anticipating that the price will continue to move in the breakout direction.

In contrast, other choices describe conditions that do not indicate a successful breakout. For instance, if the price stays within the boundary, it suggests that the range is still intact, and no breakout has occurred. Stability in price or a lack of movement also indicates continuation within the established pattern rather than a breakout. Lastly, an increase in volume can be an accompanying factor in confirming a breakout but is not a standalone indicator of it. Therefore, the key point of emphasis is that the price must close outside the defined boundaries of the rectangle for a breakout to be confirmed.