Trading Island Reversal

Island Reversal

Island Reversal

68.00

56.001

Egen

Source: TradeStetion

DecD6

Feb*07

Mart>7

Apr "07

Trading Island Reversal Pattern

The chart above illustrates an Island Reversal pattern from Amgen's (AMGN) daily chart. During 2006, AMGN rallied to $76 and reversed to $56 by April of 2007. Late January 2007, AMGN showed its first upside gap and closed at $76. Within the next few sessions, AMGN closed the first gap and formed a downside gap to complete an "Island Reversal Pattern."

1. Enter a "short" trade one tick below the low of the second gap bar.

2. Place a "stop" order above the high of the bar prior to the gap.

3. Target a major "swing low" prior to the rally.

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