Measured Moves

Geometry gives you targets

A breakout happens. You know the direction. But how far will it go? Classical TA answers with a surprisingly simple geometric method: measure the height of the pattern, then project that distance from the breakout point. Murphy and Edwards & Magee both describe this as the standard technique, and it applies to nearly every pattern you've learned.

The AB=CD measured move

Murphy describes the most intuitive version:

The measured move describes the phenomenon where a major market advance or decline is divided into two equal and parallel moves. The measured move is really just a variation of some of the techniques we've already touched on — consolidation patterns like flags and pennants usually occur at about the halfway point of a market move. — paraphrased from Murphy, Technical Analysis of the Financial Markets

The structure:

• A to B — the first leg of the trend
• B to C — a correction (typically retracing 1/3 to 1/2 of AB)
• C to D — the second leg, projected to equal the length of AB

In an uptrend: measure the rally from A to B (say, 20 points). The correction pulls back to C. Add 20 points to C — that's your target D.

Murphy illustrates this clearly:

In the measured move, when the chartist sees a well-defined situation with a rally from point A to point B followed by a countertrend swing from B to C (which retraces a third to a half of wave AB), it is assumed that the next leg in the uptrend (CD) will come close to duplicating the first leg (AB). — Murphy, Technical Analysis of the Financial Markets

This works because trends tend to move in symmetrical legs separated by consolidation or correction. The AB=CD structure is a visual expression of this symmetry.

Pattern height projections

Every pattern has a built-in measuring technique based on its height:

Head and shoulders

Measure the vertical distance from the head to the neckline. Project that distance downward from the neckline breakout point. This gives the minimum target — the move often overruns it.

Double tops and bottoms

Measure from the peak (or trough) to the intervening low (or high). Project from the breakpoint.

Triangles, rectangles, flags

Measure the widest part of the pattern (the height). Project from the breakout.

Flags and pennants (the "pole" method)

Murphy notes that flags and pennants appear at the midpoint of a move. The measured move technique here is to measure the flagpole — the sharp move preceding the flag — and project it from the flag's breakout. This is equivalent to saying the move will double its pre-flag distance.

Cups and channels

For cup-and-handle patterns, measure the depth of the cup and project upward from the handle breakout. For channels, measure the channel width and project from the breakout.

Why these projections work (approximately)

These aren't magic numbers. They work because:

1. Symmetry bias. Trends often exhibit roughly equal impulse legs because the underlying buying/selling pressure releases in similar bursts.
2. Self-fulfilling targets. Enough traders use these projections that they cluster orders at the target, creating actual resistance/support.
3. Statistical tendency. Bulkowski's Encyclopedia of Chart Patterns measures hundreds of patterns and finds that the median post-breakout move frequently clusters near the pattern-height projection — not exactly, but close enough to be useful as a first estimate.

Practical application

The measured move is a target, not a guarantee. Here's how to use it:

1. Identify the pattern — head and shoulders, flag, triangle, AB=CD.
2. Measure the height — from the extreme to the breakout boundary.
3. Project from the breakout point — that's your minimum target.
4. Set your reward: Use the projected target as the first take-profit zone.
5. Combine with Fibonacci levels. If the measured-move target coincides with a 161.8% Fibonacci extension, that's double confluence — a stronger target.
6. Adjust for trend strength. In strong trends, the actual move often exceeds the projection. In weak trends, it may fall short.

When measured moves fail

• Weak breakouts. If the breakout has low volume or immediately stalls, the projection is unreliable.
• Counter-trend context. A bullish flag's projection in a larger-degree downtrend has lower odds of reaching target.
• Overlapping patterns. When the measured-move target from one pattern conflicts with strong support/resistance from another, favor the S/R level.
• News events. No geometric projection survives an earnings surprise or central bank decision that changes the fundamental picture.

Quick check

What you now know

• The AB=CD measured move projects the second trend leg equal to the first: $D = C + (B - A)$.
• Every chart pattern has a height-based projection — head-and-shoulders, triangles, flags, rectangles all use the same principle.
• Flags and pennants at the midpoint of a move let you double the flagpole to estimate the total trend length.
• Measured-move targets are minimum objectives — strong trends often exceed them.
• Combine with Fibonacci extensions and S/R levels for confluence.

Next: Intermarket Analysis — how bonds, commodities, currencies, and stocks connect in Murphy's four-market chain, and why you can't fully understand one market without the others.