Nifty Future - Bullish Island Reversal or Failure - Anil Desai

Nifty future daily chart shows an bullish Island-cluster reversal pattern. The doji and volume surge suggests the bullishness in the coming days, yet today's almost bearish engulfing pattern seems to be spoiling the formation. Tomorrow might be the D-day to determine the success or failure of this pattern. However, I continue to hold the view that 4200 should be tested soon.

Read below why still you should not act on this pattern and wait till pattern to take shape completely.

Now some theory on Island reversal: I am posting sample charts showing this pattern.

The above figure shows an example of an island bottom reversal chart pattern. Price enters the island at A by gapping lower and another gap sharing the same price appears at B. The two gaps form the island bottom.

You can see why islands do not work well. This one shows price moving up at B and then reversing, throwing back to the breakout price and continuing lower, ending well below the bottom of the island. Throwbacks and pullbacks hurt post-breakout performance. Since throwbacks and pullbacks happen so frequently, so you can wait for them to complete before taking a position.

Read more on Island reversal pattern here and here and here