Measured Move Down Complete Guide

What is Measured Move Down?

The Measured Move Down is a three-part bearish continuation pattern that illustrates a disciplined market decline. It consists of a primary impulse leg (Leg 1), a corrective consolidation or retracement (Leg 2), and a secondary impulse leg (Leg 3). Thomas Bulkowski, in his 'Encyclopedia of Chart Patterns,' identifies this as a highly reliable formation where the second decline often mimics the first in both price magnitude and, occasionally, duration. The pattern begins with a sharp sell-off as supply overwhelms demand. This is followed by a 'dead cat bounce' or a corrective phase where prices drift upward or sideways on diminishing volume. This retracement typically recovers 38% to 62% of the first leg's losses but fails to break above the initial starting point. The signal is confirmed when price breaks below the low of the first leg, initiating the third phase. Volume characteristics are crucial: volume should be heavy during the two downward legs and noticeably lighter during the corrective phase. According to Bulkowski’s research, the pattern meets its price target—calculated by subtracting the length of the first leg from the high of the correction—approximately 60% to 70% of the time in bearish markets. It is often viewed as the bearish equivalent of the 'AB=CD' harmonic pattern, providing traders with a clear mathematical framework for profit-taking and risk management in trending environments.

Identification Rules

1. 最初の脚は、明確で識別可能な下降トレンドであり、大幅な価格の下落を伴う必要があります。
2. 調整局面（第2波）は、第1波の動きの33%から66%の間をリトレース（retracement：価格が反転して、以前の価格変動の一部を打ち消すこと）するはずです。
3. 調整局面では出来高は減少し、二度目の下落が始まるにつれて増加するはずです。
4. The second decline (Leg 3) is confirmed when the price breaks below the low established by Leg 1.

References

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

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