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Measured moves are great for everything but trading. They tell you how far price is likely to
rise, and how long it will take. The measured move up chart pattern is not always accurate hitting its price and time
targets, but it does give you an estimate. If you insist on trading them, see the
simple ABC correction. It's a nested measured move down inside a measured move up. For
more information on the measured move up chart pattern, see pages 510 to 521 of the book
Encyclopedia of Chart Patterns, Second Edition and the following...
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 Measured move up chart pattern parts
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Important Bull Market Results
Average first leg price rise: 46% in 87 days
Average corrective phase retrace: 47% in 32 days
Average last leg price decline: 32% in 60 days.
Percentage meeting price target: 45%
Percentage meeting time target: 38%
Identification Guidelines
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Characteristic |
Discussion |
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Trend |
Measured moves are reversal patterns so look for a downward price trend leading to the measured move. |
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First leg |
Usually begins from a new
low. Prices rise rapidly in a straight-line affair. Avoid rises that curve. |
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Corrective phase |
Prices retrace between 38%
and 62% of the first leg move. If the retrace carries price below the bottom of the first leg, avoid the measured move. |
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Proportional |
The corrective phase should
look proportional to the first leg. Be suspect of retraces larger than 62%. |
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Second leg |
The slope of the first leg
often matches the slope of the second leg although the two are separated by the corrective phase. Both legs often fit in channels. |
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Volume trend |
Trends downward 61% of the
time, and is dome shaped 62% of the time. |
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Avoid |
Don’t trade measured
moves that appear as horizontal, saw tooth patterns or those that spring from a flat base. |
Trading Tips
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Trading Tactic |
Explanation |
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Measure rule |
Compute the length of the first leg from the lowest valley
(point A in the Measure Rule figure to the right) to
the highest peak at the start of the corrective phase
(point B) then multiply it by the above
“percentage meeting price target.” Add the result to the lowest valley
in the corrective phase (point C) to get a price
target. |
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Buy |
Once the second leg begins
(point C in the Measure Rule figure to the right), buy.
If price drops below the corrective phase low (C),
close out the trade. |
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Target |
If price nears the target or overhead
resistance abounds near the target, close out the position. |
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Trendline |
If the projected price target
of a measured move intersects a down-sloping trendline setup by prior price action, then expect price to reverse there. |
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Completion |
After a measured move completes, price remains
above the corrective phase 19% of the time, 35% stop declining within the corrective phase, 31% stop below the corrective phase
but above the measured move’s low, and 15% drop below the measured move low. |
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Retrace |
The larger the corrective phase
retrace (the move from B to
C in the Measure Rule figure to the upper right), the
better the chance of meeting the price target. |
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Volume |
Patterns with U-shaped volume reach
their price targets more often than do those with dome-shaped volume. |
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 The Measure Rule
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Example
The above figure highlights two examples of a measured move up chart pattern. The first leg begins at point A and rises to the top of the corrective phase at B. Then price
corrects to C before finishing the measured move up chart pattern at D. You can also nest measured moves. The sequence CDAB forms another measured
move up.
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