Trading stocks education - Trading tactics & examples

Island reversals are isolated data points separated by gaps. After an extended rally the stock "gaps" higher, that is, it proceeds to open outside of the most recent trading range. After trading in the new higher range for several sessions, a second gap occurs only this time the move is lower.

Island reversals usually occur at the start of larger technical patterns and as such, technical targets are not implied but these patterns usually lead to much lower prices.

Head & Shoulders Top           One Day Reversal Pattern