One-Day Island Forecasts

We had in the example of Island Reversal previously discussed, an island built up of

three weeks of price congestion, separated by wide gaps from the preceding and
ensuing price track. This gave a forecast of a very important movement. An island
of only one days duration is equally reliable as an indication of reversal in trend but
does not, as a rule, lead to so extensive a movement.
The chart of Electric Bond and Share for the last half of 1935, Fig. V.14, shows two
good examples of One-Day Island Reversals on August 17 and November 8,
respectively,
at the tops of intermediate rallies. The gap following the second of these was
closed or overlapped by the price range on November 14 and again on November
20, but it will be noted that these minor rallies failed to attain the top level of the
Island, and the reversal forecast was eventually carried out. An interesting feature
of this chart is the Double Bottom formation at the 101/2 level which again reversed
the trend following the first Island (see Study IV).
The 1936 American Steel Foundries chart (Fig. V.15), shows a One-Day Island on
July 8 that reversed a minor down trend and led to a strong upward movement. The
bottom reversal in this stock in early May was built on an Ascending Triangle (see
Study III).