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Measured Move Up

measured move is an upward sloping price move (bottom left to top right) followed by a retracement downward (towards the bottom right) and then a movement upward to the top right

The measured move reverses the prior trend and acts as a continuation pattern. For a measured move up or sometimes called a bullish measured move, prices reverse upward after a prior downtrend. There are three sections of the measured move up pattern: First, is the first leg which has an upward trend; second, the correction where prices retreat downward; and third, the second leg, which moves higher once again. The main idea is that after the retracement, price should resume the trend at the same slope and should be roughly the same percentage gain as the first move (Rockefeller, 2012, p. 167).

Average Time and Price Traits of Measured Move Up

diagram showing the average timespans and average percentage price moves of the measured move upwards

A more precise evaluation of measured move ups given by Bulkowski (2005) states that on average, the first leg rises approximately 46% higher over about 87 days; the correction where prices retreat downward occurs at a loss of about 47% in 32 days; and the second leg moves higher on average 32% in approximately 60 days (Bulkowski, 2005).

Measured Move Up Buy Signal and Price Target

Because the measured move is less of a pattern and more of a predictive price tool, other patterns are borrowed from in order to create buy signals. For instance, often the correction forms a downtrend channel, therefore, when prices break above the downtrend resistance line, a buy signal is triggered. A secondary buy signal can be given when prices break above the high established on the first leg move upward.

The measured move is essentially a price target. The 2nd leg should be closely identical to the 1st leg. Therefore, if the first leg was a distance of 20 points, then the second leg should be roughly 20 points as well. A more fine-tuned price target based on historical research is given by Bulkowski (2008):

Measured Move Up Price Target: Lowest Price During Correction Leg + ((Highest Price During Correction Leg - Low at Beginning of 1st Leg) * 45%)

Measured Move Down

measured move is an downward sloping price move (top left to bottom right) followed by a retracement upward (towards the top right) and then a movement downward to the bottom right

For a measured move down or bearish measured move, an uptrend precedes the pattern. The first leg is a reversal of the prior uptrend and is downward, followed by the correction where prices move upward, and finally, prices fall downward on the final leg. Typically a sell signal is triggered when prices break below the correction phase's uptrend channel's support line. A secondary sell signal is triggered when prices break below the low of the first leg's low.

Average Time and Price Traits of Measured Move Down

diagram showing the average timespans and average percentage price moves of the measured move downwards

Bulkowski (2005) has outlined that during bull markets, the first leg of the measured move down is approximately a 27% decline over an average of 61 days, then a correction of roughly 48% in about 30 days, a finally the 2nd leg occurs with a 25% drop in 62 days.

Measured Move Down Price Target

Bulkowski (2008) offers the following equation for a suggested price target:

Measured Move Down Price Target: Highest Price During Correction Leg - ((High at Beginning of 1st Leg - Lowest Price During Correction Leg) * 35%)

Bullish Measured Move Chart Example

stock chart of Nasdaq 100 with a measured move upward

The weekly chart above of the Nasdaq 100 ETF (QQQ) illustrates a measured move upward that reversed the prior downtrend. The first leg was a gain of 46% over 56 days. The corrective phase was 19% over 98 days. The measured move or 2nd leg was a gain of 40% over 126 days.

Bearish Measured Move Chart Example

stock chart of BAC with a measured move downward

The weekly chart of Bank of America shows a successful measured move pattern. The first leg down was a decline of 44.5% over 231 days. The correction back upward was a retracement of 40% and happened over 42 days. The 2nd leg was a decline of 40% over 203 days; that consisted of only the declines that occurred in the downtrend channel of the 2nd leg; the decline to the eventual bottom was 67.5%.

Works Referenced

  1. Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
  2. Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
  3. Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
  4. Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
  5. ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.
  6. The Pattern Site. (2005). Bulkowski's Measured Move Down . Retrieved June 1, 2012, from http://thepatternsite.com/mmd.html
  7. The Pattern Site. (2005). Bulkowski's Measured Move Up . Retrieved June 1, 2012, from http://thepatternsite.com/mmu.html