Island of Reversal Patterns
Island of reversal is a very popular chart/candlestick pattern indicating the reversal of an existing trend. It is considered a very strong reversal indicator when formed after a strong trend. Island of candlestick is a candlestick or group of candlesticks (or sessions) which gap away from the existing trend. There are island bottom reversals (bullish) and island top reversals (bearish).
Island of reversal is one of the easy to identify patterns. Bullish islands of reversals form at the end of downtrends where prices gap down to form new lows but will soon gap up (after one or more sessions) to fill the gap, starting a new uptrend. Similarly bearish islands of reversals form at the end of uptrends where prices gap up to form new highs but soon gap down to fill the gap, starting a new downtrend.
Island of reversal patterns are usually associated with dramatic changes in trading volume. Usually the gaps are noticeable with high trading volume and the peak/trough is noticeable by low trading volume. Island of reversals are patterns which favor both short-term and long-term traders. Patterns which include one or two gap-away trading sessions favor short-term traders whereas those including many sessions favor long-term traders. The reliability of both bottom patterns increases with significance of prior trend.
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Island of reversal is one of the easy to identify patterns. Bullish islands of reversals form at the end of downtrends where prices gap down to form new lows but will soon gap up (after one or more sessions) to fill the gap, starting a new uptrend. Similarly bearish islands of reversals form at the end of uptrends where prices gap up to form new highs but soon gap down to fill the gap, starting a new downtrend.
Island of reversal patterns are usually associated with dramatic changes in trading volume. Usually the gaps are noticeable with high trading volume and the peak/trough is noticeable by low trading volume. Island of reversals are patterns which favor both short-term and long-term traders. Patterns which include one or two gap-away trading sessions favor short-term traders whereas those including many sessions favor long-term traders. The reliability of both bottom patterns increases with significance of prior trend.
NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage
posted by NobleTrading at
9:38 AM
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