Island Reversal
A price cluster isolated by two gaps on either side — a sharp reversal signal where the gap-up and gap-down create a gap island.
An Island Reversal occurs when a cluster of candles is separated from the prior trend by a gap up (or gap down) and then gapped back in the opposite direction, "stranding" the island cluster. For a bearish island top: price gaps up into the island, trades for one or more days, then gaps back down below the initial gap — leaving the island isolated.
Both gaps combined signal sudden, decisive sentiment shift. High-volume exhaustion on the island bars strengthens the signal. The target is often a return to the pre-gap origin.
Example
A stock gaps up 4% on Monday on hype, drifts sideways Tuesday–Wednesday, then gaps down 5% on Thursday on bad news. The three-day island is stranded above — bearish reversal in effect.
Related Terms
Broadening Formation
Expanding price swings with higher highs and lower lows, forming a megaphone shape — signals increasing volatility and often precedes a sharp reversal.
AdvancedDouble Top
Two consecutive peaks at roughly the same price level, separated by a pullback, signalling exhaustion and potential trend reversal downward.
BeginnerReversal Pattern
Any pattern that signals a change in the prevailing trend direction — Head and Shoulders, Double Tops/Bottoms, and wedges at extremes are classic examples.
Beginner