Measured Move ABCD Example in Mar 10 SPY Intraday

Mar 10, 2010: 5:01 PM CST

I love highlighting Measured Move Patterns (very similar to flags) in the markets due to the price pattern symmetry and structure – each one serves as a great educational reference of this not-so-common pattern.

Fewer people know what an AB=CD pattern is than do a bull or bear flag – though the two patterns are similar.

Let’s take a look at today’s AB=CD Measured Move and see how we could have traded it so we’ll know this concept next time it forms.

First, an “AB=CD” Pattern is more commonly called a “Measured Move,” and it is like a flag (we’ll call this a bull flag for comparison) except for two distinctions:

1.  The “impulse” or first leg (flagpole) is often more ‘drawn out’ or takes on a 45 degree angle while the bull flag is more steep/sharp/vertical

2.  The Retracement (flag) is almost always deeper than a standard flag pullback

Everything else is roughly the same… but with one more exception in trading tactics.

Most traders only trade the “Projection” of a Bull Flag (meaing the “CD Leg” in the chart above) and that’s usually all you get from a flag – there’s no reason to flip and reverse once a flag completes… but to take profits at the price target.

However, in an AB=CD pattern, some traders will trade the “CD Leg” measured move, while others will wait specifically to see if the pattern completes fully into the 100% Projection Target BEFORE putting on a short-sale position.

In other words, flags focus on the “price projection” leg up while AB=CD moves may focus on that, but mainly focus on the retracement down from the “D” target.

Confusing?

Take a moment to read over the information at my “Bull and Bear Flag” section as well as:

How to Project a Measured Move of a Bull Flag.

In the pattern above on today’s chart, a “Measured Move” Trader would be looking to short-sell any weakness (reversal candle, divergences, etc) at the $115.20 target, which was established by making a Price Projection from the “C” low (keep in mind that these labels are not Elliott Wave notation).

There actually were two opportunities to short at the $115.20 target – the first being the morning swing that formed upper shadow dojis just beyond the target, and the second chance being the afternoon bearish engulfing (like) candle before 2:00 CST.

Take a moment to study these opportunities and the “Measured Move” structure above, and see if this pattern – again similar to a flag – would be a nice fit to your trading style.

I described this pattern – and other intraday opportunities – in greater detail in today’s “Idealized Trades” member report.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

7 Comments

7 Responses to “Measured Move ABCD Example in Mar 10 SPY Intraday”

  1. wanessafruas Says:

    Corey, ex-post, we can always fit the price action according to a given chart pattern. Do not u agree?

  2. Corey Rosenbloom, CMT Says:

    TA in general is about pattern recognition, and the more patterns you study and observe and learn from, the better you'll be to act on patterns you see in real-time.

    That's the point of studying charts.

  3. TheYenGuy Says:

    The S&P on March 10, 2010 closed at 114.93, which is a double high of its January 11 trade olf 114.73.

    Your chart shows how the S&P's closing value is in the middle of a broadening top pattern; Street Authority says, when you see the Broadening Top, the market will soon drop. I expect the S&P to drop very very soon.

    In fact the S&P, could turn lower on March 11, 2010 as a lower price of oil, USO, copper, JJC, lead, JJN, lead the energy producers, XLE, and energy service providers, OIH, and the metal produces, XME, lower; especially on announcement that the Bank of China is taking measures to reign in inflation. The chart of USO, JJC, JJN, XME, and OIH, should be the canary in the S&P coal mine. http://tinyurl.com/yhtdf8g.

    I have no credentials and do not serve as a finanical advisor, yet I am very concerned about a coming liquidity sqeeze, where one may not be able to get one's money at the brokerage service or at the money market account, I strong encourage one to invest in British Sovereign coins, in the GLD ETF, GLD, in a trust account and at Bullion Vault.com

  4. Corey Rosenbloom, CMT Says:

    TA in general is about pattern recognition, and the more patterns you study and observe and learn from, the better you'll be to act on patterns you see in real-time.

    That's the point of studying charts. No two patterns are identical.

  5. TheYenGuy Says:

    The S&P on March 10, 2010 closed at 114.93, which is a double high of its January 11 trade olf 114.73.

    Your chart shows how the S&P's closing value is in the middle of a broadening top pattern; Street Authority says, when you see the Broadening Top, the market will soon drop. I expect the S&P to drop very very soon.

    In fact the S&P, could turn lower on March 11, 2010 as a lower price of oil, USO, copper, JJC, lead, JJN, lead the energy producers, XLE, and energy service providers, OIH, and the metal produces, XME, lower; especially on announcement that the Bank of China is taking measures to reign in inflation. The chart of USO, JJC, JJN, XME, and OIH, should be the canary in the S&P coal mine. http://tinyurl.com/yhtdf8g.

    I have no credentials and do not serve as a finanical advisor, yet I am very concerned about a coming liquidity sqeeze, where one may not be able to get one's money at the brokerage service or at the money market account, I strong encourage one to invest in British Sovereign coins, in the GLD ETF, GLD, in a trust account and at Bullion Vault.com

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