A “Floating Island” is a very specific technical setup on any chart. Essentially, the stock or futures contract must be heading in one direction (trending), then gap IN that same direction, trade sideways in a range, and then gap back out of that range in the opposite direction. The concept of a Floating Island is that you get a bunch of players at a range high or low that are now trapped out of the market, having no chance to exit at their desired stop. This then creates a mechanism that pushes the market away from the island.
The NASDAQ 100 (NDX) formed a 2-day Floating Island on Monday and Tuesday, after having a downward trend for weeks before it, then gapping down Monday, trading sideways Tuesday, and gapping back up Wednesday. The confirmation is when you take out Wednesday’s high on Thursday, which we did. That is the buy signal and the point where those who had been selling or shorting down on those two days are now starting to panic. It tends to lead, in this case, to more upward movement. Here’s a look at the raw chart with the Floating Island in the black box:

The one caveat at the moment is that we have a huge economic number coming out in the morning, which is the Advanced look at Q1 GDP, which the market is focusing on. That could beat or disappoint and cause another gap. A gap down here from news would lessen the impact of the Floating Island, but anything else means we’re probably bullish in the short term.
On top of it, this particular floating island formed at a very important technical location on the chart when you have more information. Our Seeker tool, which uses a 9-bar look-back mechanism to spot turning points in the market, had a 9-bar up move back in March that formed a key static trendline, which becomes a “trade to” target, if you will, on a reversal. That is denoted by the red line on this chart:

As you can see, the market rolled, headed down, gapped to the static trendline, which we identified as a target and support area, and formed the sideways action for two days there, then gapped up. We were warning people against selling further at that red line, and now you have a Floating Island set to penalize those that did.