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Written by and copyright © 2005-2010 by Thomas N. Bulkowski. All rights reserved.
For more information on this pattern, read
Encyclopedia of Chart Patterns, Second Edition  ,
pictured on the right, pages 480 to 495. That chapter gives a complete review of the chart pattern, including tour, identification guidelines, focus on failures, performance statistics, trading tactics, and sample trade. Below is just a sliver of the information contained in the book.
This is not a new pattern, but one in which I coined the name to distinguish it from island
reversals. With long islands, the gaps do not align. Long islands are a continuation pattern that perform best in all
markets except a bull market.
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Long Island Chart Pattern Example
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Important Bull Market Results
Overall performance rank for up/down breakouts (1 is best): 15 out of
23; 6 out of 21
Break even failure rate for up/down breakouts: 11%; 5%
Average rise/decline: 31%; 22%
Throwback/pullback rate: 67%; 54%
Percentage meeting price target for up/down breakouts: 82%; 78%
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Identification Guidelines
| Characteristic | Discussion |
| Price trend | Price can trend in any direction leading to the island. |
| Shape | Non-aligned gaps separate a price island from the mainland. |
| Gaps | Two gaps that setoff the long island do not share the same price. Those that do share the same price form island reversals. |
| Wide gaps | Look for gaps at least $1 wide. |
| Length | Look for islands shorter than 4 months. |
| Volume shape | U-shaped because of high volume surrounding each gap. |
| Sequence | Islands tend to get shorter as they appear in a price trend. Thus, they can signal a trend change. |
| Breakout | The second gap marks the breakout day. |
Trading Tips
| Trading Tactic | Explanation |
| Measure rule | Compute the height from the highest peak
(point A in the Measure Rule figure to the right) to
lowest valley in the island (B) and divide by two then multiply it
by the above “percentage meeting price target.” Add the height to (upward breakouts) or subtract it from (downward breakouts) the closing
price the day before the second gap. The result is the target price, C. |
| Short | Avoid short islands that appear well into the trend. They may signal a coming trend change. |
| Yearly middle | Avoid long islands that appear in the middle of the yearly price range. They perform worst. |
| Height | Tall islands perform better than short ones. |
| Height, width | Long islands both tall and wide perform best (upward breakouts); tall and narrow perform best after a downward breakout. |
| Volume shape | Long islands with dome-shaped volume outperform. |
| Throwbacks and pullbacks | Throwbacks and
pullbacks hurt post breakout performance. |
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 The Measure Rule
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Example
The above figure shows examples of long island chart patterns. The first begins with a breakaway gap at point C and ends the next day with an
exhaustion gap at D. The next long island
begins at A and completes at B.
-- Thomas Bulkowski
Copyright © 2005-2010 by Thomas N. Bulkowski. All rights reserved. Press any key...no, no, no, NOT THAT ONE!
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