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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

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Chart Patterns: After the Buy
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Bulkowski's Measured Move Down

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Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 11/22/2017
23,526 -64.65 -0.3%
9,627 11.94 0.1%
758 -0.24 0.0%
6,867 4.88 0.1%
2,597 -1.95 -0.1%
YTD
19.0%
6.4%
14.9%
27.6%
16.0%
Tom's Targets    Overview: 11/14/2017
23,700 or 22,800 by 12/01/2017
9,300 or 9,800 by 12/01/2017
800 or 750 by 12/01/2017
7,000 or 6,500 by 12/01/2017
2,625 or 2,540 by 12/01/2017

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

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.

Measured moves are great for everything but trading. They tell you how far price is likely to drop, and how long it will take. The measured move down 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.

Measured move down chart pattern
Measured Move Down Chart Pattern

 

Important Bull Market Results for the Measured Move Down

Average first leg price decline: 27% in 61 days
Average corrective phase retrace: 48% in 30 days
Average last leg price decline: 25% in 62 days.
Percentage meeting price target: 35%
Percentage meeting time target: 53%

The above numbers are based on hundreds of perfect trades. See the glossary for definitions.

Measured Move Down Identification Guidelines

CharacteristicDiscussion
TrendMeasured moves (MMDs) are reversal patterns so look for an upward price trend leading to the MMD.
First legUsually begins from a new high. Prices decline rapidly in a straight-line affair. Avoid declines that curve.
Corrective phasePrices retrace between 38% and 62% of the first leg move. If the retrace carries price above the top of the first leg, avoid the MMD.
ProportionalThe corrective phase should look proportional to the first leg. Be suspect of retraces larger than 62%.
Second legThe slope of the first leg often approximates the slope of the second leg although the two are separated by the corrective phase. Both legs often fit in their own channels.
Volume trendTrends downward 74% of the time and is dome shaped 61% of the time.
AvoidDon't trade measured moves that appear as horizontal, saw tooth patterns or those that spring from a flat base.
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Measured Move Down Trading Tips

Trading TacticExplanation
Measure ruleThe second leg averages 19% shorter than the first. Compute 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.
CompletionAfter a MMD completes, price remains below the corrective phase 16% of the time, 35% stop rising within the corrective phase, 31% rise above the corrective phase but below the MMD's start, and 18% continue rising above the MMD.
RetraceThe larger the corrective phase retrace, the better the chance of meeting the price target.
VolumePatterns with U-shaped volume reach their price targets more often than do those with dome-shaped volume.
Measured move down chart pattern measure rule
The Measure Rule
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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.

-- Thomas Bulkowski

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Other Measured Move Down Examples

See Also

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Press any key to continue or any other key to quit.