Measured (Bull) Move (Continuation)
The Measured Move is a three-part formation that begins as a reversal pattern
and resumes as a continuation pattern. The Measured (Bull) Move consists of a
reversal advance, correction/consolidation and continuation advance. Because the
Measured (Bull) Move cannot be properly identified until after the
correction/consolidation period, I have elected to categorize it as a
continuation pattern. The pattern is usually long-term and forms over several
- Prior Trend: For the first advance to qualify as a reversal, there
must be evidence of a prior downtrend to reverse. Because the Measured (Bull)
Move can occur as part of a larger advance, the length and severity of the
prior decline may vary from a few weeks to many months.
- Reversal Advance: The first advance usually begins near the
established lows of the previous decline and extends for a few weeks or many
months. Sometimes a reversal pattern can mark the initial trend change. Other
times the new uptrend is established by new reaction highs or a break above
resistance. Ideally, the advance is fairly orderly and lengthy with a series
of rising peaks and troughs that may form a price channel. Less erratic
advances are satisfactory, but run the risk of forming a different pattern.
- Consolidation/Correction: After an extended advance, some sort of
consolidation or correction can be expected. As a consolidation, there could
be a continuation pattern such as a rectangle or ascending triangle. As a
correction, there could be 33% to 67% retracement of the previous advance and
the possible patterns include a large downward-sloping flag or falling wedge.
Generally speaking, the bigger the advance, the bigger the correction. A 100%
advance may see a 62% correction and a 50% advance may see only a 33%
- Continuation Advance - Length: The distance from the low to the
high of the first advance can be applied to the low of the consolidation/retracement
to estimate a projected advance. Some technicians like to measure by points,
others in percentage terms. If the first advance was from 30 to 50 (20 points)
and the consolidation/correction was to 40, then 60 would be the target of the
second advance (50 - 30 = 20 : 40 + 20 = 60). For those who prefer
percentages: if the first advance was from 30 to 50 (66%) and the
consolidation/correction was to 40, then 66.40 would be the target of the
second advance (40 X 66% = 26.40 : 40 + 26.40 = 66.40). The decision of which
method to use will depend on the individual security and your analysis style.
- Continuation Advance - Entry: If the consolidation/correction is
made up of a continuation pattern, then second leg entry points can be
identified using the normal breakout rules. However, if there is no readily
identifiable pattern, then some other continuation breakout signal must be
sought. In this case, much will depend on your trading style, objectives, risk
tolerance and time horizon. One method might be to measure potential
retracements (33%, 50%, or 62%) and look for short-term reversal patterns for
good reward-to-risk entry points. Another method might be to wait for a break
above the reaction high set by the first advance as confirmation of
continuation. This method would make for a late entry, but the pattern would
- Volume: Volume should increase at the beginning of the reversal
advance, decrease at the end of the consolidation/correction and increase
again at the beginning of the continuation advance.
The Measured (Bull) Move can be made up of a number of patterns. There could
be a double bottom to start the reversal advance, a price channel during the
reversal advance, an ascending triangle to mark the consolidation and another
price channel to mark the continuation advance. During multi-year bull markets
(or bear markets), a series of Measured (Bull) Moves can form. While the
projections for the continuation advance can be helpful for targets, they should
only be used as rough guidelines. Securities can overshoot their targets, but
also fall short -- technical assessments should be ongoing.
Intel (INTC) broke out of a multi-year slump and began a Measured (Bull)
- Prior Trend: After a large downward sloping trading range
throughout most of 1997 and 1998, Intel broke above resistance in early
November (blue arrows) and started the first leg of a Measured (Bull) Move.
- Reversal Advance: The breakout occurred with a strong move above
resistance at 22 with 2 weeks of strong volume (green arrows). The advance
began from 17.44 and ended at 35.92.
- Consolidation/Correction: After an extended advance, the stock
declined within a set range that resembled a large descending flag. The
decline retraced about 54% of the previous advance.
- Continuation Advance - Length: The estimated length of the advance
was 18.48 points from the June low at 25.94, which would target 44.42. The
actual high was 44.75 for a 18.81 advance.
- Continuation Advance - Entry: Because the consolidation/correction
portion formed a continuation pattern, entry could have been based on a break
above the resistance line (red arrow).
- Volume: Volume increased in early November at the beginning of the
reversal advance. There was a decrease from March to May 1999. And, volume
increased at the beginning of the continuation advance (green arrows).