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Bullish Long Island Continuation Pattern

long island continuation pattern in an uptrend

Long islands are continuation patterns, which means that if prices before the pattern are in an uptrend, then prices should continue after the pattern upward. Therefore, if prices before the pattern are in a downtrend, then prices should continue after the confirmed pattern downward. A bullish long island continuation pattern occurs when prices gap up and there is a consolidation period above that gap and then another gap occurs at the end of the consolidation upwards; prices are then expected to continue higher.

Bearish Long Island Continuation Pattern

long island continuation pattern in a downtrend

A bearish long island continuation pattern occurs when prices gap down and there is a consolidation period below that gap and then another gap down occurs at the end of the consolidation period; prices are then expected to continue lower.

Average Max Gain Bullish Long Island

green up arrow with 31% gain of the long island bar chart pattern

The averaged maximum gain for bullish long islands is 31% before any 20% correction occurs;

Average Max Decline Bearish Long Island

red arrow with decline average

And for bearish long islands, the decline is 22% (Bulkowski, 2005).

Price Targets

Bulkowski (2005) suggests the following price targets for the long island patterns:

Bullish Long Island: Closing Price Before the 2nd Gap + ((Highest Price of Long Island - Lowest Price of Long Island)/2 * 82%)
Bearish Long Island: Closing Price Before the 2nd Gap - ((Highest Price of Long Island - Lowest Price of Long Island)/2 * 78%)

Traits that Increase the Effectiveness of Long Island Continuation Pattern

Traits that increase the effectiveness of the Long Island pattern is given by Bulkowski (2005) next:

  • Tall islands have better performance than shorter islands
  • For bullish long islands, tall and wide perform best
  • For bearish long islands, tall and skinny perform best
  • Gaps should be at least a $1 in size

Bullish Long Island Continuation Pattern Chart Example

grouping of price bars in the middle of an uptrend surrounded by a gap below and gap above the long island

The chart of the Energy SPDR ETF (XLE) shows an uptrend with a long island continuation pattern during the uptrend. Prices rose prior to the gap up. Prices gapped up and then prices consolidated for three weeks, then prices gapped up again, continuing the prior upward move.

Bearish Long Island Continuation Pattern Chart Example

long island continuation pattern in a downtrend

The chart above of Coca Cola Company (KO) shows a three month dramatic decline with a long island continuation pattern in the middle of the move downward. Prices gap down, then prices follow with a weeklong downtrend that creates the "pole" portion of the pennant pattern. Prices then ascend forming the pennant; however, prices fake a move upward before doing what is expected with the pennant pattern by moving downward. The downward move is accentuated by a gap down, completing the long island continuation formation.

Works Referenced

  1. Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
  2. Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
  3. Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
  4. Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
  5. ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.
  6. The Pattern Site. (2005). Bulkowski's Long Island . Retrieved June 1, 2012, from http://thepatternsite.com/longisland.html