Japanese candlesticks - Island reversal
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Bullish island reversal
Definition: A bullish island reversal structure is comprised of several Japanese candlesticks and ideally only 3. The first and second candlesticks are separated by a bearish gap and it is a third candlestick that fills the previous gap with a bullish gap.
Illustration:
Characteristic: A bullish island reversal often forms after a significant drop characterized by several large red Japanese candlesticks.
Significance: A bullish island reversal is a reversal pattern, it indicates a bullish trend reversal. It reflects overconfidence on the part of sellers that allows buyers to take control.
Note: It is a very rare but powerful pattern. The island can be more or less large (one or more candlesticks)
Invalidation: If the bearish or bullish gap is filled on a wick, the bullish island reversal structure is invalidated.
Bearish island reversal
Definition: A bearish island reversal structure is comprised of several Japanese candlesticks and ideally only 3. The first and second candlesticks are separated by a bullish gap and it is a third candlestick that fills the previous gap with a bearish gap.
Illustration:
Characteristic: A bearish island reversal often forms after a significant increase characterized by several large green Japanese candlesticks.
Significance: A bearish island reversal is a reversal pattern, it indicates a bearish trend reversal. It reflects overconfidence on the part of buyers that allows sellers to take control.
Note: It is a very rare but powerful pattern. The island can be more or less large (one or more candlesticks)
Invalidation: If the bullish or bearish gap is filled on a wick, the bearish island reversal structure is invalidated.
