Island Reversals

[RogerM]

Richard - I rarely see the reverse H&S - perhaps down to my mind-set. Maybe I need to turn my monitor upside down! 😱)

I still use the spreadsheet that uses David Schultz's research occasionally - depends on whether it is s time when there are a lot of them around. I don't think that the statistical research for H&S tops is directly transferable to H&S bottoms - but I still take them into account if I spot them.

Regards, Roger

 

[InDisguise]

You might want to take a look at BLT, Island reversal in place by looks of it as long as it doesn't fill the gap down.

ID.......🙂

 

[RogerM]

Thanks ID. Nice 2 day island close to resistance. Multi day islands tend not to be as reliable as 1 day islands, but worth monitoring none the less. This would not have been detected by my scan - maybe need to rewrite it to pick up multi day islands. Now to test out Martin's chart cropping instructions!

 

[ChartMan]

mmmm 2 day Island?..... My understanding of Islands is that there only needs to be a gap between close and open...by 2 day reversal, I think you are taking the High to next day's Low as being the criteria.I can't say it's wrong, I just haven't read about it.... I'm sorry, I haven't done any more work on the Islands...I guess when I do, I should see if there is any significance between using close/open to high/low.
A quick TA rule refresher wouldn't go amiss here- Each stock has it's own personality. BHP's "gapping" personality may be that it's Island reversals follow a close/open rule, as opposed to a high/low.....examine the last three top reversals......
Glad you got the chart posting sorted.

 

[Mr. Charts]

Multi-day island reversals are sometimes quite powerful patterns.
In effect they are upward exhaustion gaps meeting longer term resistance. In large cap stocks with heavy institutional involvement it takes a little longer for such players to decide whether to reduce holdings. It does look like there is some distribution in this stock, but I would be wary of taking too large a short position without further verification over the next day or two.
Remember also that SETS sometimes produces hi/lo extremes far from the VWAP - ie those extreme prices might not be very significant - and this distorts daily bar charts

Richard

 

[InDisguise]

According to JJ Murphy:

'The exhaustion gap on the upside followed by a breakaway gapto the downside completes the Island reversal pattern and usually indicates a trend reversal of some magnitude. Of course, the major significance of the reversal depends on where the prices are in the general trend structure'

ID

 

[Naz]

Hi Richard

You were talking about multi day island reversals.I knew i'd seen one somewhere.its just happened on VRSN on the Nasdaq and looks very good on a 60 minute chart.

 

[Mr. Charts]

Thanks Alan,
An excellent example of a multi day reversal
Richard ;-)

 

[ChartMan]

How easy it would have been to be long overnight at $46, only to gap down the next morning 🙁 Still, for those TA aware, it's not the GAP/Island structure here that was important- it was the ominously glaring, jump out of the wall Head and Shoulders!