What is the fundamental concept of a ‘Leg 1 = Leg 2’ measured move?
It’s a market pattern where a second move (Leg 2) is approximately the same size as an initial move (Leg 1) after a pause or pullback.
In a trending market, what is the first target traders often look for after a pullback?
A second leg that is about the same size as the first leg.
What is a ‘nested’ Leg 1 = Leg 2 measured move?
A pattern where a smaller Leg 1 = Leg 2 move is contained within one of the legs of a larger Leg 1 = Leg 2 move.
What two actions do traders typically take when the market reaches a measured move target?
Bulls take profits, and aggressive bears begin to sell for scalps.
A Leg 1 = Leg 2 measured move is considered the _____ goal after a deep pullback in a trend.
minimum
What common bull trend pattern often takes the form of a Leg 1 = Leg 2 measured move?
A Spike and Channel bull trend.
In a Spike and Channel bull trend, which part represents the stronger phase of the trend?
The Spike (the initial strong breakout).
What does bad follow-through (e.g., a bull bar followed by a bear bar) within a channel suggest about the rally?
It suggests the rally is likely a leg within a trading range rather than the start of a major bull trend.
According to Al Brooks, what is the approximate probability that a bull channel, which acts as a bear flag, will have a bear breakout and evolve into a trading range?
75% of the time.
What is a ‘confluence of resistance’?
A price level where multiple resistance calculations, such as different measured move targets, converge.
Why is a confluence of resistance or support significant for traders?
It increases the likelihood that bulls will take profits and bears will initiate shorts at that level.
What is a primary challenge when trying to calculate a Leg 1 = Leg 2 measured move?
It’s often difficult to know definitively where Leg 1 and Leg 2 begin.
When faced with multiple possible starting points for a measured move leg, what is a practical approach for a trader?
Look at all possibilities, starting with the nearest one, and watch how the market reacts at each projected target.
If the market strongly breaks through a measured move target without pausing, what does this signal to traders?
It signals that computers are not paying attention to that target, and traders should look for the next higher resistance level.
According to the ‘80% rule’ for strong trends, what is the expected outcome for most reversal attempts?
Approximately 80% of reversal attempts will fail and become flags for trend resumption.
What is the first target for traders after a breakout from a trading range that has lasted 20-40 bars?
A measured move based on the height of the trading range.
The market alternates between a trend and a _____.
trading range
What does a ‘measuring gap’ often signify after a breakout from a trading range?
It suggests that the market will likely achieve a measured move based on the height of the trading range.
In a less common type of measured move, what part of a trading range is sometimes considered the midpoint of a larger move?
The middle of the trading range.
Besides a trend leg or trading range height, what is a third basis for calculating a measured move?
The height of the breakout itself (e.g., the open to the close of the breakout bars).
Following a strong breakout, what is the approximate probability that an ensuing measured move will be in the same direction?
0.6
Following a strong bull breakout, what is the approximate probability that the market will reverse and fall for a measured move down based on the breakout’s height?
0.4
When a market breaks below the bottom of a strong bull breakout, what is the probability it will fall for a measured move down based on the breakout’s height?
A 50% chance.
When a strong bull breakout occurs, traders using a measured move based on the breakout bars will project a target from the open of the first bar to the _____ of the final bar of the breakout.
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