Although the stock market has broken out to new swing highs, our ETF scans have not produced many high quality breakout candidates. In yesterday's issue of The Wagner Daily trading newsletter, we pointed out the bullish trade setup in iShares Nasdaq Biotech Index ($IBB), which we were looking to buy on a pullback to near support of its breakout level. That ETF trade setup remains technically valid and is on our internal watchlist going into today.

First Trust Dow Jones Internet Index ($FDN) is one of the few potential breakout candidates we have been monitoring for several weeks now. The long-term monthly chart below shows the heavy volume breakout to new highs, which occurred last December:



Since this is the first price consolidation since its big breakout, we believe $FDN has more upside if the market remains healthy.

We originally liked $FDN as a continuation breakout on February 14, 15, and 19, but the price action failed to follow through and reversed sharply to the lows of the range. This is shown on the daily chart pattern below:



Notice that $FDN has rallied right back to the highs of range and broke out yesterday (March 6), but volume was light and the price action failed to close above the highs of the range. Now, if $FDN chops around for a few days and holds above the $43 level, we could see an a tradeable breakout develop next week. We'll keep a close eye on it and will notify regular subscribers if/when we decide to buy this swing trade setup.

Deron Wagner is the Founder and Head Trader of both Morpheus Capital LP, a U.S. hedge fund, and MorpheusTrading.com, a trader education firm.