Hourly head and shoulders pattern


Tuesday brought the fourth consecutive day of directionless trading. Since last Thursday, the major indices have “chopped” in a tight trading range. The market is obviously in consolidation mode. Stocks were mixed on the day. The Consumer Discretionary and Technology Sectors posted small gains of 0.4% and 0.3% respectively. Consumer Staples and Materials were the laggards on Monday, as both sectors shed 0.6%. The Nasdaq was the only major index to show a measurable gain, as it closed up by a meager 0.3%. The Dow Jones Industrial Average and the S&P 500 both closed at par, while the S&P MidCap 400 and the small-cap Russell 2000 both dropped 0.1% for the session. All in all, the day was uneventful.

Tuesday’s volume changed little, day over day. Nasdaq turnover increased by 10% while the NYSE’s volume was off by 3%. The advancing to declining volume ratio on both indices was at virtual parity. On the NYSE, declining volume edged out advancing volume by a meager 1.1 to 1. The Nasdaq saw up volume outpace down volume by 1.2 to 1. For the session, market internals provided no indication of institutional involvement.

The technical patterns for many ETFs suggest another move higher in the market. Many of the long set ups look identical. They might be characterized as “vanilla”. We are always cautious in placing trades when the market provides technical patterns that “everyone is talking about”. At times like this it is often a good practice to search for trades that have a low correlation to the market. Our current position in TBT provides a good example. Bond, commodity and international ETFs; generally show a low market correlation and we are monitoring them closely.

One technical pattern that has been showing up frequently in the past three weeks is the “head-and-shoulders” pattern. Since three weeks is a relatively short time period, the 60 minute timeframe comes in handy. Below are several ETFs that have formed head-and-shoulders patterns over the past several weeks.

The iShares Russell Microcap Index Fund (IWC) has been consolidating nicely for the past 10 trading days and has formed a bullish flag like pattern. Further, it has filled the gap formed on October 13th. IWC also realized a dramatic increase in volume on Tuesday. A rally above the two day high of $45.00 on solid volume, provides a potential entry point for IWC. We will provide trade details should we decide the proper conditions exist to enter this trade.

Today’s Watchlist:

There are no new setups for today. We will send an intraday alert if any new trades are made.

Daily Performance Report:

Below is an overview of all open positions, as well as a performance report on all positions that were closed only since the previous day’s newsletter. Net P/L figures are based on the $50,000 Wagner Daily model account size. Changes to open positions since the previous report are listed in red text below. Please review the Wagner Daily Subscriber Guide for important, automatic rules on trigger and stop prices

    position summary

    Having trouble seeing the position summary graphic above?
    Click here to view it directly on your Internet browser instead.


  • Per intraday alert, we added 100 shares (at 33.88) to our TBT position and raised the stop in IBB.
  • Reminder to subscribers – Intraday Trade Alerts to your e-mail and/or mobile phone are normally only sent to indicate a CHANGE to the pre-market plan that is detailed in each morning’s Wagner Daily. We sometimes send a courtesy alert just to confirm action that was already detailed in the pre-market newsletter, but this is not always the case. If no alert is received to the contrary, one should always assume we’re honoring all stops and trigger prices listed in each morning’s Wagner Daily. But whenever CHANGES to the pre-market stops or trigger prices are necessary, alerts are sent on an AS-NEEDED basis. Just a reminder of the purpose of Intraday Trade Alerts.
  • For those of you whose ISPs occasionally deliver your e-mail with a delay, make sure you’re signed up to receive our free text message alerts sent to your mobile phone. This provides a great way to have redundancy on all Intraday Trade Alerts. Send your request to [email protected] if not already set up for this value-added feature we provide to subscribers.

    Have you had your free 1-month trial to Morpheus Trading Group’s additional ETF and stock trading newsletters?

      Edited by Deron Wagner,
      MTG Founder and
      Head Trader