Prices gap down to the formation then gap up at the same price level, leaving an island.Bottoms have prices that lead down to the left gap and rise away from the right gap.
Percent of successful formations – 85%
Failure rate – 17%
Average time to throwback completion – 2 hours
Compute the formation height by subtracting the lowest low from the highest high in the formation. Add the difference to the highest high for island bottom. The result is the target to which prices should rise.