The measured move, which can also be called swing measurement, is a simple observation that some market moves are made in two equal parts, with a retracement of 33% or 50% in the middle. It can give you a price target after an initial retracement or correction. It is really a development of some of the techniques we have already looked at. All you do is transpose the initial move on to the end of the retracement to get the next target, like so –
Looking back at other consolidation patterns such as flags and pennants, you will recall that they frequently occur at the half way point of a price move – remember the “flag flying at half mast”? The measured move is similar in effect.
You may be following a trend, as shown on the left of the chart, which is well behaved and goes up in a channel. The measured move pattern acknowledges that even if the channel is broken to the downside, the trend may not be finished. Retracements are frequently 33% or 50%, as noted above, with a maximum of 67% before you would decide that the trend had failed.
You would use the measured move by simply watching the retracement turn around, and project the distance for the next move to give the next target.
