Island Reversal / 離れ小島
Reference values based on Bulkowski's "Encyclopedia of Chart Patterns". Data is primarily from U.S. markets and may differ for other markets.
A powerful reversal pattern where a price zone is isolated from surrounding price action by gaps, forming an "island." First, a gap opens in the trend direction, followed by several days of trading, then a gap opens in the opposite direction, creating the island. At tops it is bearish; at bottoms it is bullish.
Enter when the second gap (opposite direction) is confirmed. Short for top island reversals, long for bottom ones. Confirm that the second gap is not filled.
Project 2-3 times the island's height (highest to lowest within the island) from the second gap in the reversal direction. Nearby support/resistance lines are also effective targets.
Place a stop-loss inside the island. For a top island reversal, place slightly above the island's high.
Ideally, volume surges on both gaps. A particularly large volume on the second gap (reversal direction) enhances pattern reliability.