Measured Moves: Video 20 A&B Flashcards
Define Measured Move (MM)
When the market moves the distance from the top of the previous:
Height of Prior Leg
Height of Trading Range
Height of Prior Breakout
Another Measured Move (MM) example
This one has a lot of bull bars and no bear bars
Example of Nested Measured Move
This one had the same distance, but in two legs. And leg 1 started at the same price as a failed leg before it.
When a trend is very strong, like a Breakout (BO), traders expect more trend to follow after Pullback (PB)
Here is a Measured Move after a deep pullback.
When you have a channel with bad follow through, it can be a sign of…
Trading Range
Whenever Al sees a strong Breakout (BO), early in a trend he likes to look at the open of the first bar, and the close of the final bar of the breakout. Sometimes its 1 bar, sometimes 3-4 bars. Then project up from the open of first bar, and close of second bar. Then project up. This is an area where bulls will take profits. See Photo
Nested measure Move Patterns. Small Patterns within larger ones
Nested MM Pattern example
When the market is in a pretty strong bull trend, the first resistance level will usually …..
Not stop the trend.
When you have different points, it’s hard to tell where the measured move began.
The computers will disregard outliers. Start with the nearest one, and if the measured move goes beyond it, look at the others. When the market ignores on target, look at another target.
Whenever the market has a breakout, it tries to move the same distance as before. For example, breakout of trading range will move the distance of the range.
20 B
Gaps. Consider the Negative gap, where Bars overlap, but bodies did not. Applies to Measured Move.
Market Cycles alternate between Trend and Trading ranges. When a Measured Move (MM) is based on a Trading Range, it usually leads to a breakout
Al says that a TR is an agreement in price. Therefore a Measured Move can come from the bottom of the range, and the middle of the range is 50%. See Photo
Al Says most people aren’t interested in these 50% TR Measured Moves.
Always look Measured Move based on the Height of the Trading Range
Whenever there is a breakout that is very strong, traders will often look for a second leg. they will expect the second leg to about the length of the first one.
When the trend is very strong, like a Breakout, traders expect more trend to follow ater the pullback.
Nested Patterns: Small legs within Big Legs
Al says whenever the market is in a strong trend, the first resistance level will not stop the trend.
Here, strong rally, then trading range, then trend resumption, then for a measured move up based on the height of the trading range.
The first target for a trading range that lasts 20+ bars is a measured move based on the height of the range.
All Trends end at resistance. So it’s important to keep looking at higher resistance levels, and then watching what the market does when it gets there.
If there’s a confluence of resistance at the same price level, bulls will be more willing to take profits and bears will be more willing to sell.
Where does the Measured Move being?
Most computer use the start of the breakout.
The 1st Leg usually begins with a breakout
Here, the 2nd leg starts after a Trading Range (So always look for a set-up f the 2nd leg).
Whenever the market has a breakout, it usually tries to move the same distance as something before. What are three possibilities?
Height of prior leg
Height of Trading Range
Height of prior breakout
Define “Negative Gap”
When there is no overlap of the bodies on a pullback.
When the pullback overlaps the bars, but the bodies don’t overlap.
When there is no overlap, that is a better indicator of the start of a measured move. But the Negative gap usually leads to a Measured Move.
The middle of the range is often the middle of the move (So the market goes up, then sideways, then resumes.)
Can a Measured Move be against a trend?
Yes.
Here we go. Measured Move can be in either direction (To further confuse us).
60% of the time in direction of trend. 40% of time in opposite direction.
Look for strong breakout
Look to see what happens at the bottom of the breakout? Stopping or continuing down?
Here, instead of reversing up at support, it continues down.
Another example of Measured Move from an opposite direction
Measured Move: Kind of ridiculous. Here, if you would have bought the pullback for a MM up, you would have gotten stopped out. But I guess the pullback didn’t have many bull bars.
Another example of Reverse Measured Move. Here, sort of a Nested Measured Move.
