Trend is your friend. Dance with the friend. Tune to the trend.
Island Formation is a reversal chart pattern, formed by price action in a group of multiple time period, which is separated from rest of the price action by gaps. It is very reliable with 80% probability.
This leaves behind an island of bars / candlesticks. Thus it is called as Bullish Island Reversal Formation.
The break away gap usually fills in a few days by a pull back price action, before the new trend continues.
Study the chart given below.
Similarly at the end of an up trend, we get Bearish Island Reversal, characterised by candlesticks with long upper wicks. Here an entry is made below the break away gap, with the stop loss above the gap.
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