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Gap up, isolated trading, gap back down - the island is abandoned as price reverses sharply.
The Bearish Island Reversal is a powerful reversal pattern where a candle or cluster of candles is isolated by gaps on both sides — creating an 'island' of price action stranded above the surrounding market.
The pattern forms when price gaps up during an uptrend, trades for one or several sessions, and then gaps back down below the island. The two gaps leave the island completely detached from the price action before and after. This isolation represents a dramatic sentiment shift — buyers who bought on the island are now trapped above the market.
The Bearish Island Reversal represents the ultimate bull trap. The uptrend is running, and then a gap up occurs — euphoria peaks, buyers pile in at the top, everything seems bullish. Price may trade on the island for one session or several days.
Then, suddenly, a gap down occurs. Price doesn't just pull back — it gaps completely below the island, leaving no overlap. Every buyer on the island is instantly underwater with no chance to exit at reasonable prices.
The psychological impact is severe. The trapped buyers above create overhead supply (they'll sell on any rally back to their entry). Meanwhile, the gap down triggers panic selling and stop losses. The combination of trapped longs and fresh shorts accelerates the reversal.
Conservative: Enter short when the gap down is confirmed (doesn't fill by close).
Aggressive: Enter short on the gap down open - island reversals are highly reliable.
Above the upper gap. The island is defined by two gaps - if the upper gap fills, the pattern is invalidated.
T1: Support level below the lower gap. T2: Measured move equal to the height of the island projected downward from the lower gap. Island reversals often lead to aggressive moves.
Typically 1:2.5 or better. The dual-gap structure creates a well-defined stop with significant downside potential.
Bearish Island Reversals are rare in 24/7 crypto markets where true gaps require exchange maintenance, flash crashes, or extreme sentiment shifts. On traditional markets, they're more common at major tops and carry high reliability.
Two gaps isolating a cluster of candles signal institutional repositioning. These don't fail often.
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