Bearish measured move or measured move down is a three phased continuation chart pattern. The pattern starts as reversal of an existing uptrend but is considered as continuation pattern as the pattern is only confirmed after the second phase. The 3 phases of bearish measured move are reversal decline phase, consolidation/retracement phase and continuation decline phase.
The requirements of bearish measured move pattern include,
- The pattern should begin at the top/end of a strong uptrend.
- The reversal decline phase starts near a high. The downward price decline should be pretty orderly; usually breaking a major support and forming a price channel. This phase lasts from a few weeks to many months. If the price is greatly curved, then the validity of the pattern is challenged.
- The consolidation/retracement phase follows the first phase. If it is a price retracement, it can be up to 67% of the first phase. Consolidation patterns such as rectangle chart pattern and descending triangle or retracement patterns such as rising wedge, bearish flag and bearish pennant formations should occur at the end of this phase.
- The continuation decline phase should (almost) match the slope of the first phase.
- Volume confirmation is no so important. Generally, the volume should increase at the beginning of both decline phases and should decrease at the end of the retracement phase.
With bearish measured move pattern, traders can go short at the confirmation of breakout of consolidation/retracement phase. Traders should use appropriate price target suiting the continuation pattern at the end of the consolidation phase.
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