Island Reversal (Top) Chart Pattern — How to Spot and Trade It

Price gaps up, trades on an 'island', then gaps down — leaving buyers stranded.

In plain words

A day-trip to an island that ends with the last ferry leaving without warning.

What the classic books say

The Island Reversal (Top) is a reversal pattern with reference reliability Medium and illustrative behaviour of ~65-70% follow-through (the kind of statistics catalogued in Bulkowski's encyclopedic pattern studies and Murphy's technical-analysis classic). More common after extended rallies with news spikes.

Level by level

Beginner

A jump up, a pause, a jump down — everyone who bought on the island is trapped.

Intermediate

The twin gaps isolate a distribution zone; trapped longs supply the fuel for the fall.

Advanced

The exhaustion gap + breakaway gap combination is the highest-conviction form.

Trade plan (educational template)

• Entry: On the downside gap (or its first retest that fails).
• Stop-loss: Above the island's high.
• Target: Measured from the island's height, or to the origin of the first gap.
• Check the numbers with the Risk-Reward calculator before any entry.

Common beginner mistakes

• Ignoring the gap-fill risk on the retest

Practise it now

• ▶ Draw the Island Reversal (Top) with live trendlines and a ghost forecast
• 📖 Full lesson in the Learning Hub

_Educational content only — not financial advice. Historical behaviour never guarantees future results._