Bulkowski’s Long Island

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This is not a new pattern, but one in which I coined the name to distinguish it from island reversals. With long islands, the gaps do not align. Long islands are a continuation pattern that perform best in all markets except a bull market. For more information see pages 480 to 495 of the book Encyclopedia of Chart Patterns, Second Edition and the following...

Important Results

Identification Guidelines

Trading Tips

Example

Long island chart pattern

Important Bull Market Results

Overall performance rank for up/down breakouts (1 is best): 15 out of 23; 6 out of 21

Break even failure rate for up/down breakouts: 11%; 5%

Average rise/decline: 31%; 22%

Throwback/pullback rate: 67%; 54%

Percentage meeting price target for up/down breakouts: 82%; 78%

Identification Guidelines

Characteristic	Discussion
Price trend	Price can trend in any direction leading to the island.
Shape	Non-aligned gaps separate a price island from the mainland.
Gaps	Two gaps that setoff the long island do not share the same price. Those that do share the same price form island reversals.
Wide gaps	Look for gaps at least $1 wide.
Length	Look for islands shorter than 4 months.
Volume shape	U-shaped because of high volume surrounding each gap.
Sequence	Islands tend to get shorter as they appear in a price trend. Thus, they can signal a trend change.
Breakout	The second gap marks the breakout day.

Trading Tips

Trading Tactic	Explanation
Measure rule	Compute the height from the highest peak (point A in the Measure Rule figure to the right) to lowest valley in the island (B) and then multiply it by the above “percentage meeting price target.” Add it to (A, upward breakouts) or subtract it from (B, downward breakouts) the lowest low in the pattern. The result is the target price, C.
Short	Avoid short islands that appear well into the trend. They may signal a coming trend change.
Yearly middle	Avoid long islands that appear in the middle of the yearly price range. They perform worst.
Height	Tall islands perform better than short ones.
Height, width	Long islands both tall and wide perform best (upward breakouts); tall and narrow perform best after a downward breakout.
Volume shape	Long islands with dome-shaped volume outperform.
Throwbacks and pullbacks	Throwbacks and pullbacks hurt postbreakout performance.

The Measure Rule

Example

Long island chart pattern example

The above figure shows examples of long island chart patterns. The first begins with a breakaway gap at point C and ends the next day with an exhaustion gap at C. The next long island begins at A and completes at B.