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Gap down, isolated trading, gap back up - leaving a price "island" surrounded by gaps. Powerful reversal.
The Bullish 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 below the surrounding market.
Price gaps down during a downtrend, trades in an isolated zone, then gaps back up above the island. The two gaps leave the island completely detached. Sellers who sold on the island are trapped below the market as price escapes upward.
The Bullish Island Reversal is the ultimate bear trap. The downtrend is running, a gap down occurs — capitulation appears complete. Sellers pile in at the low, expecting further decline.
Price trades on the island for one or more sessions. The expected continuation never comes. Instead, a gap up occurs, leaving the island stranded below. Every seller on the island is instantly offside.
The trapped shorts above create buying pressure (they need to cover). Meanwhile, the gap up triggers momentum buying. The combination of short covering and fresh longs creates a powerful reversal move.
Conservative: Enter long when the gap up is confirmed (doesn't fill by close).
Aggressive: Enter long on the gap up open - island reversals are highly reliable.
Below the lower gap. The island structure depends on both gaps remaining open - if the lower gap fills, the reversal is negated.
T1: Resistance level above the upper gap. T2: Measured move equal to the island's height projected upward from the upper gap. Bullish islands at major support often produce strong rallies.
Typically 1:2.5 or better. The clean gap structure provides tight risk definition.
Bullish Island Reversals are rare but powerful. In crypto, true gaps require exchange downtime or extreme sentiment shifts. The pattern's strength comes from the complete isolation of the price island, trapping participants on the wrong side.
The gaps on both sides create strong support. If price fills the gap, the pattern is invalidated - exit immediately.
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