Happy New Years Folks hope you all are having a great day – be ready for another full year of trading starting Monday. Below is an article by Adam Beaty from Bullogic. Make sure to check out his site and also follow him on Twitter.
| Breakaway Gap |
Here we see a nice consolidation and finally the buying becomes strong enough to gap the price up. From there we see a nice run. This gap takes a non-trending stock and moves it to a trending stock. As a confirmation of the breakaway gap we want a nice spike in volume.
The island reversal is bit of a rare pattern so when it happens it makes a strong signal to trade on. A gap is created, it moves to sideways trading, and then it gaps in the other direction and continues to trend that direction. Lets show some examples:
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| Island Reversal |
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| Island Reversal |
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| Island Reversal |
The thing to notice about the island reversal is that the second gap need to be in the same general area as the first gap. This creates a strong force back in the opposite direction of the first gap.
