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Bulkowski's Long Island

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As of 02/20/2019
  Industrials: 25,954 +63.12 +0.2%
  Transports: 10,627 +9.81 +0.1%
  Utilities: 746 +2.71 +0.4%
  Nasdaq: 7,489 +2.30 +0.0%
  S&P 500: 2,785 +4.94 +0.2%
YTD
+11.3%
+15.9%
+4.6%
+12.9%
+11.1%
Tom's Targets    Overview: 02/14/2019
26,000 or 24,600 by 03/01/2019
10,900 or 9,900 by 03/01/2019
755 or 725 by 03/01/2019
7,700 or 7,050 by 03/01/2019
2,825 or 2,650 by 03/01/2019

Written by and copyright © 2005-2019 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Some pattern names are the registered trademarks of their respective owners.

Statistics updated on 12/18/2018.

For more information on this pattern, read Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book., 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 bear markets.

Long island chart pattern
Long Island Chart Pattern Example

 

Important Bull Market Results for Long Island

Overall performance rank for up/down breakouts (1 is best): Not ranked
Break even failure rate for up/down breakouts: 21%; 27%
Average rise/decline: 33%; 14%
Throwback/pullback rate: 53%; 52%
Percentage meeting price target for up/down breakouts*: 71%; 55%

The above numbers are based on over a thousand of perfect trades. See the glossary for definitions.

* Note that the measure rule for long islands uses half the island's height.

Long Island Identification Guidelines

CharacteristicDiscussion
Price trendPrice can trend in any direction leading to the island.
ShapeNon-aligned gaps separate a price island from the mainland.
GapsTwo gaps that setoff the long island do not share the same price. Those that do share the same price form island reversals.
Wide gapsLook for gaps at least $1 wide. This is an arbitrary number.
LengthLook for islands shorter than 4 months. This is an arbitrary limit.
SequenceIslands tend to get shorter as they appear in a price trend. Thus, they can signal a trend change.
BreakoutThe day after the second gap is the breakout day.
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Long Island Trading Tips

Trading TacticExplanation
Measure ruleCompute 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.
ShortAvoid short islands that appear well into the trend. They may signal a coming trend change.
Yearly middleAvoid long islands with upward breakouts that appear in the middle of the yearly price range. They perform worst.
HeightTall islands perform better than short ones.
Height, widthLong islands both tall and wide perform best for both breakout directions.
Long island chart pattern measure rule
The Measure Rule
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Long Island Example

Long island chart pattern 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

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See Also

Written by and copyright © 2005-2019 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Some pattern names are the registered trademarks of their respective owners. Press any key...no, no, no, NOT THAT ONE!