mid cap stocks definition

Mid-cap stocks were one of the hottest investments of the past year until recently.

That is clearly exemplified by the iShares S&P MidCap 400 Index (NYSE: IJH), which jarred investors by sinking 2.3% over the past three trading days. The exchange-traded fund (ETF) had shot up 33% in the 12 months prior.

But the good news is that a reversal could be in the making.

That is, the sharp decline of the past few days may have helped to set the right shoulder of an inverse "head-and-shoulders" pattern. This is a classic reversal pattern that tends to occur at the end of major declines. You can see for yourself on the accompanying chart.