Measuring chart pattern height for breakout targets

Treat the finished pattern as a measuring stick

After price leaves a completed technical pattern, the pattern’s own vertical size can be used to estimate a first travel objective and to frame the cost of being wrong. That vertical span is the pattern height, and projecting it from the break is a measured-move.

Support is a price area where a decline has repeatedly stalled because buyers become more active. Resistance is a price area where a rally has repeatedly stalled because sellers become more active. Those are prices at which buyers and sellers have previously balanced, and repeated tests of the same level tend to make that level more important.

Rectangles and triangles can be read as price action trapped between support and resistance, so a breakout implies that the old value band is no longer accepted.

Start with a rectangle

A rectangle is the simplest structure to size because its top and bottom are roughly parallel. That height is then projected from the break as a first objective.

In one gold-futures sequence, a prior range about $8 high was treated as the measuring unit after support failed, so a break of $327 pointed to a next checkpoint near $319.

Measure a triangle-pattern and a head-and-shoulders

A triangle-pattern is a contracting trading range in which later highs and lows form closer together until price leaves the coil. A triangle is a range that shrinks over time. Its height is taken at the second border touch and then projected from the breakout.

A head-and-shoulders is a reversal structure whose measured objective is taken from the neckline to the extreme of the middle peak or trough. Both neckline placement and tilt are left to the analyst’s judgment.

Integral multiples and confirmation

In a mid-1990s US bond triangle, a height of about 4 points from a break near 116-16 produced a first objective at 114-16. When that level failed, a second multiple sat at 110-16. That later checkpoint is an integral multiple: the same pattern height added or subtracted again after the first projected level is exceeded.

A third multiple of a pattern height is described as less common and often incomplete, with the actual swing stopping short of the third objective.

Height projections are treated as stronger when they land on independently drawn support or resistance. That agreement is confirmation. The same measuring logic is said to apply to triangles, head-and-shoulders, and other patterns on weekly, daily, and hourly charts.