Subscribe to RSS feeds Bulkowski Blog via RSS

Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

Support this site! Clicking the links (below) takes you to Amazon.com. If you buy ANYTHING, they pay for the referral.

Picture of Bumper.
Kindle
Paperback
Nook
Picture of the head's law.
Kindle
Paperback
Nook
Chart Patterns: After the Buy
Getting Started in Chart Patterns, Second Edition book.
Trading Basics: Evolution of a Trader book.
Fundamental Analysis and Position Trading: Evolution of a Trader book.
Swing and Day Trading: Evolution of a Trader book.
Visual Guide to Chart Patterns book.
Encyclopedia of Chart Patterns 2nd Edition book.

Bulkowski's Measured Move Down

Class Elliott Wave Fundamentals Psychology Quiz Research Setups Software Tutorials More...
Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 08/17/2018
25,669 110.59 0.4%
11,228 37.37 0.3%
744 2.94 0.4%
7,816 9.81 0.1%
2,850 9.44 0.3%
YTD
3.8%
5.8%
2.8%
13.2%
6.6%
Tom's Targets    Overview: 08/14/2018
26,200 or 24,700 by 09/01/2018
11,400 or 10,700 by 09/01/2018
750 or 700 by 09/01/2018
8,250 or 7,600 by 09/01/2018
2,900 or 2,775 by 09/01/2018

Written by and copyright © 2005-2018 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Some pattern names are the registered trademarks of their respective owners.

Updated with new statistics 5/31/2018.

For more information on this pattern, read Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book., pictured on the right, pages 496 to 509. That chapter gives a complete review of the chart pattern, including tour, identification guidelines, focus on failures, performance statistics, trading tactics, and sample trade. Below is just a sliver of the information contained in the book.

The measured move, as I have implemented it, is an improved version of the traditional pattern. I find them automatically now. Patternz has the same algorithm built in, so you won't have to guess if one occurs. It'll show you.

The idea behind a measured move is that the second leg will equal the first leg in both price and time. That's for the ideal pattern. Reality shows the pattern falls short of expectations, at least my implementation of it. This version of the pattern sees the second leg meet or exceed the price of the first leg 55% of the time. Yuck.

Measured move down chart pattern
Measured Move Down Chart Pattern

 

Important Bull Market Results for the Measured Move Down

Average first leg price decline: 11% in 10 days
Average corrective phase retrace: 85% in 9 days
Average last leg price decline: 11% in 11 days.
Percentage meeting price target: 55%
Percentage meeting time target: 5% (exact matches only)

The above numbers are based on more than 1,800 perfect trades. See the glossary for definitions.

Measured Move Down Identification Guidelines

The algorithm finds three consecutive turns, starting with a minor high (top of leg 1) then a minor low (start of the corrective phase), and then a retrace of at least 70%, ending in a minor high (the end of the corrective phase). It's assumed that the next minor low will end the pattern at the bottom of the second leg.

CharacteristicDiscussion
TrendMeasured moves (MMDs) are reversal patterns so look for an upward price trend leading to the MMD.
First legAny minor high which leads to a minor low.
Corrective phaseThe algorithm looks for retraces of at least 70%. Those lead to the best measure-rule performance.
Second legPrice ends the pattern at a minor low.
Top of page   More

Measured Move Down Trading Tips

Trading TacticExplanation
Measure ruleCompute the length of the first leg from highest peak (point A in the Measure Rule figure to the right) to lowest valley at the start of the corrective phase (B) then multiply it by the above "percentage meeting price target." Subtract the result from the highest peak in the corrective phase (C) to get a price target.
ShortShort once the second leg begins. If price rises above the corrective phase high, close out the short.
TargetIf price nears the target or support abounds near the target as price approaches, close out the position.
RetraceThe larger the corrective phase retrace, the better the chance of meeting the price target.
Measured move down chart pattern measure rule
The Measure Rule
Top of page   More

Measured Move Down Example

Measured move down chart pattern example

The above figure shows an example of a measured move down chart pattern. Price begins the first leg down at A and ends at B where it enters the corrective phase. The peak in the corrective phase is at C and that marks the start of the second leg down. The second leg ends at D before price pulls back to E and eases down thereafter.

Please note that this example was found manually, not using my new algorithm.

-- Thomas Bulkowski

Top of page   More  

Other Measured Move Down Examples

See Also

Written by and copyright © 2005-2018 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Some pattern names are the registered trademarks of their respective owners. Press any key to continue or any other key to quit.