Island Reversal
A cluster of periods isolated on both sides by gaps in opposite directions, leaving it detached from the surrounding chart.
How it is identified
Test: a gap in one direction, one or more periods of trading, then a gap back in the opposite direction, with the two gaps overlapping in price
Unit
qualitative
In depth
The formation requires two gaps in opposite directions with no trading between them and the surrounding data, which makes it rare and easy to identify unambiguously — unusual among chart patterns. It typically arises when a security gaps on news, trades briefly at the new level, and then gaps back when the news is revised or superseded. Because it is rare, the sample of historical instances is small and any statistical claim about what follows is correspondingly weak. It is described here as a formation, not as a signal, and no directional inference is offered.
Worked example
A stock gaps up from ₹400 to ₹436, trades between ₹430 and ₹445 for three sessions, then gaps down to ₹402. Those three sessions are an island, separated from everything before and after by untraded price space.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Island Reversal” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.