Swing Trading Strategies & Stock Picks Since 2003

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