Measured Move Up Complete Guide

What is Measured Move Up?

The Measured Move Up is a three-part bullish continuation pattern that visualizes a market's rhythmic advance. It consists of a primary advance (Leg 1), a corrective consolidation or retracement, and a secondary advance (Leg 2). Thomas Bulkowski, in his 'Encyclopedia of Chart Patterns,' identifies this as a highly reliable formation, often used by swing traders to project price targets. The pattern begins with a sharp rally where prices move upward on strong momentum. This is followed by a 'corrective phase' where the asset retraces a portion of its gains—typically between 33% and 62% of the first leg—forming a zig-zag, flag, or pennant. The final stage, Leg 2, commences when the price breaks above the corrective high. Technically, the signal is confirmed when the price resumes its upward trajectory after the consolidation. The 'measured' aspect refers to the tendency of Leg 2 to equal the price distance of Leg 1. Volume typically follows a distinct U-shaped or declining pattern during the correction, expanding significantly as the second leg begins. According to Bulkowski’s research, the pattern has a low failure rate (around 9% in bull markets) and reaches its price target approximately 66% of the time. It is essential to ensure the corrective phase does not drop below the start of Leg 1, as this would invalidate the bullish structure. Traders often use the height of the first leg added to the low of the correction to calculate the ultimate profit target.

Identification Rules

1. The pattern must consist of two distinct upward price moves separated by a corrective consolidation.
2. The corrective phase should ideally retrace between 33% and 62% of the first leg's height.
3. The second leg should begin only after the price breaks above the high of the corrective phase.
4. Volume should decrease during the correction and increase significantly during the breakout into the second leg.

References

• Thomas N. Bulkowski (2005). Encyclopedia of Chart Patterns.
• Steve Nison (2001). Japanese Candlestick Charting Techniques.

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