«An island reversal occurs when the price of a security gaps up (or down), trades above (or below) the gap for a while, and then gaps down (or up) past the first gap. The price action forms group of prices that are separated from the rest of the price pattern by two gaps. As its name implies, this is a reversal pattern. The first gap indicates that prices may continue in the direction of the gap. However, lack of follow through after the gap shows hesitation. The second gap, which is in the opposite direction of the first, offers a strong indication of trend reversal. The reversal is intact until the second gap is closed. Keep in mind the other aspects of technical analysis should be employed as well.»
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