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gandra
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Number of messages : 3556
Points : 7603
Date of Entry : 2013-01-13
Year : 47

Island Reversal Pattern

on Sun Mar 29, 2015 11:40 am
Island reversals are isolated data points separated by gaps. After an extended rally the stock "gaps"
higher, that is, it proceeds to open outside of the most recent trading range. After trading in the new
higher range for several sessions, a second gap occurs only this time the move is lower.

Island reversals usually occur at the start of larger technical patterns and as such, technical targets are not implied but these patterns usually lead to much lower prices.

• Island reversals are news driven and usually occur because conflicting news events occur within short
time frames.
• Volume should accelerate on both the initial breakout and the subsequent failure for island reversal.
• Island reversals are "trend killers" and usually lead to the formation of large patterns that follow the
trend.

After an extended rally the stock opens well above the most recent trading range following news. This break out from the previous consolidation pattern occurs on huge volume and appears legitimate but after several days the stock fails to move significantly higher. New buyers become anxious, sellers should have been removed with the most recent move through resistance, something is wrong. Days later there is fundamental news that contradicts the news that initiated the breakout and already anxious new buyers panic, the stock opens lower. Weeks later the stock is well off the recent highs.
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Vlad
Number of messages : 192
Points : 1237
Date of Entry : 2015-04-21
Year : 28

Re: Island Reversal Pattern

on Sun Feb 21, 2016 10:37 pm
Figure of trend turn is one of the most reliable methods of determining the end of the current trend and the beginning of the next. The ability to see them on price charts helps you to find the best point to enter the market and get a good profit.
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