Island Inversion

2022-03-14, 11:08
Today let's study more about K line pattern shape.

Definition:
Bottom island reversal
The bottom island reversal is when the currency price continues to fall and suddenly closes a downward gap. The price then hovered at the bottom and recovered shortly after, but the gap was never filled, and then closed an upward gap. The gaps on both sides are roughly in the same price area, making the numerous candlesticks in the bottom area look like an island on the chart.
As shown in the following picture :
The technical characteristics of island reversal
Appears in a downtrend or adjustment trend.
Two gaps when falling or rising, basically in the same price area.
When the bottom island reverses and breaks upward, it is generally accompanied by the enlargement of the trading volume.
The technical meaning of island inversion
After the high volume gaps up and breaks through, it is a signal of bottoming out and buying.

2. Top island reversal
As the price of the currency continues to rise, those traders who are hesitant to follow up are always unable to buy at the expected price. The short-running and strong upward trend make them impatient and start to rush in at any cost. So a rising gap is formed on the graph. However, the currency price was under pressure to consolidate at a high level. After a period, the bearish power defeated the bullish power and gained an overwhelming advantage. The currency price fell below the consolidation area in a gap. The gaps on both sides are almost in the same price area, making the top area form an island of many candlesticks.

As shown in the following picture :
The technical characteristics of the top island reversal
Appears in an uptrend or rebound trend.
Two gaps when rising or falling, basically in the same price area.
No matter whether the trading volume is enlarged or not, as long as the currency price gaps downward to complete the top island reversal, the technical pattern is trustworthy.
The technical meaning of the top island reversal
After the downward gap break, it is a down signal, sell.

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