As of 10/15/2020
  Indus: 28,494 -19.80 -0.1%  
  Trans: 11,989 +101.34 +0.9%  
  Utils: 875 +0.03 +0.0%  
  Nasdaq: 11,714 -54.86 -0.5%  
  S&P 500: 3,483 -5.33 -0.2%  
YTD
-0.2%  
 +10.0%  
-0.4%  
 +30.6%  
 +7.8%  
  Targets    Overview: 09/29/2020  
  Up arrow29,300 or 27,400 by 11/01/2020
  Up arrow12,000 or 11,000 by 11/01/2020
  Up arrow915 or 840 by 11/01/2020
  Up arrow12,800 or 11,300 by 11/01/2020
  Up arrow3,700 or 3,400 by 11/01/2020
CPI (updated daily): Arrows on 9/25/20
As of 10/15/2020
  Indus: 28,494 -19.80 -0.1%  
  Trans: 11,989 +101.34 +0.9%  
  Utils: 875 +0.03 +0.0%  
  Nasdaq: 11,714 -54.86 -0.5%  
  S&P 500: 3,483 -5.33 -0.2%  
YTD
-0.2%  
 +10.0%  
-0.4%  
 +30.6%  
 +7.8%  
  Targets    Overview: 09/29/2020  
  Up arrow29,300 or 27,400 by 11/01/2020
  Up arrow12,000 or 11,000 by 11/01/2020
  Up arrow915 or 840 by 11/01/2020
  Up arrow12,800 or 11,300 by 11/01/2020
  Up arrow3,700 or 3,400 by 11/01/2020
CPI (updated daily): Arrows on 9/25/20

Bulkowski on Island Tops and Island Bottoms

 

Island bottom and top statistics updated on 8/26/2020.

For more information on this pattern, read Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book., pictured on the right, pages 464 to 479. That chapter gives a complete review of the chart pattern, including tour, identification guidelines, focus on failures, performance statistics, trading tactics, and sample trade. Below is just a sliver of the information contained in the book.

If you click on the above link and then buy the book (or anything) while at Amazon.com, the referral will help support this site. Thanks.

-- Tom Bulkowski

$ $ $

Island reversal chart pattern
Island Reversal Chart Pattern

The above picture shows an island top reversal. The horizontal arrows point to gaps that align at the same price.

Island Tops and Island Bottoms: Important Bull Market Results

Overall performance rank for up/down breakouts (1 is best): 38 out of 39 (island bottoms)/31 out of 36 (island tops)
Break even failure rate for up/down breakouts: 31%/34%
Average rise/decline: 31%/13%
Throwback/pullback rate: 54%/55%
Percentage meeting price target for up/down breakouts: 82%/62%

The above numbers are based on 2,000+ perfect trades. See the glossary for definitions.

Island Tops and Island Bottoms: Identification Guidelines

CharacteristicDiscussion
Price trendTops have price trending upward to the island; bottoms have price trending downward.
ShapeGaps separate a price island from the mainland.
GapsTwo gaps must share some or all of the same price.
VolumeHigh on the day price makes the second gap.
DurationThe island can be one day to several months long.

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Island Tops and Island Bottoms: Trading Tips

Trading TacticExplanation Island measure rule
The Measure Rule
Measure ruleCompute the height from the highest peak (A in the Measure Rule figure to the right) to the lowest valley in the island (B) and then multiply it by the above 'percentage meeting price target.' Add the result to the price of the highest peak (A, upward breakouts) or subtract it from the lowest valley (B, downward breakouts). The result is the target price, C, shown only for downward breakouts.
HeightTall islands perform better than short ones.
Throwbacks and pullbackspullbacks hurt post breakout performance. Since throwbacks and pullbacks happen so frequently, you can wait for them to complete before taking a position.

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Island reversal chart pattern example

Island Tops and Island Bottoms: Example

The figure shows an example of an island bottom reversal chart pattern. Price enters the island at A by gapping lower and another gap sharing the same price appears at B. The two gaps mark the island bottom boundaries.

You can see why islands do not work well. This one shows price moving up at B and then reversing, throwing back to the breakout price and continuing lower, ending well below the bottom of the island.

-- Thomas Bulkowski

 

 

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See Also

 

Support this site! Clicking any of the books (below) takes you to Amazon.com. If you buy ANYTHING while there, they pay for the referral.

My novels:  Bumper's Story Head's Law

Chart Patterns: After the Buy Getting Started in Chart Patterns, Second Edition Trading Basics Fundamental Analysis and Position Trading Swing and Day Trading Visual Guide to Chart Patterns Encyclopedia of Candlestick Charts Encyclopedia of Chart Patterns 2nd Edition Trading Classic Chart Patterns

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Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.
Some pattern names are registered trademarks of their respective owners.

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