Islands

Islands are an even more extreme example of a change in market sentiment giving a sharp reversal. An island is formed by at least two gaps. In an uptrend reversal, the first gap is a "break away" as the market opens higher than the previous time periods high, and maintains that gap. The gap is never "filled" in that at least one entire time period is traded above the gap. The reversal occurs when prices fall sharply in a subsequent period, whether it be the next period or many later. The drop has to gap through, leaving an island of price activity clearly defined by at east two gaps, one up, one down. The reverse is tme in a turn of a bear market. Futures markets sometimes have gaps. while 24-hour foreign exchange markets tend to see them less frequently. When seen though, they can be powerful indications of a trend change.

 

Comprehension Questions

1. What do continuation patterns show?

2. How are ascending and descending triangles for med?

3. How do wedges differ from triangles?

4. When do wedges form a counter trend consolidation area?

5. Why is a rectangle called a trading range?

6. Why is the flag, or pennant pattern one of the most reliable of all technical formations?

7. When does a gap usually show on the bar graph?

8. What kinds of gap do you know?

Exercises

Ex. 1. Put questions to the underlined words and let your partner answer them.

Ex. 2. Describe the market situation using the gaps chart.

Ex. 3. Read and translate the text.

Ex. 4. Select sentences which are difficult to translate and make a syntactical analysis of them.

 

 

 

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