Anticipating AARK's Selloff - Market Analysis for Dec 6th, 2021
On the morning of November 24, when the ARK Innovation Fund ETF (ARKK) was circling 106, Mike Paulenoff cautioned MPTrader members about additional downside.
Mike wrote: "Earlier this AM, Ark Funds manager and 'guru' Cathie Wood was interviewed extensively on CNBC. Notwithstanding the fact that Wood IS 'talking her book,' she is nevertheless extremely compelling and is all about 'innovation figuring out the future,' which she says in 5 years will look nothing like the present. Her ARK Innovation Fund (ARKK) is loaded with the highest-beta names you can think of, i.e., TSLA, COIN, U, ZM, ROKU, SQ, etc, reflecting her longer-term outlook for innovation and technological advancement.
"That said," Mike added, "purely from the technical setup exhibited by the price action of her ARKK ETF, ARKK has been, and still is, in the grasp of a major correction in the aftermath of a meteoric rise from the March 2020 low at 33.00 to the Feb. 2021 high at 159.70. Yes, Cathie Wood's ARKK ETF has been in the grasp of a major correction for the past 9 months, and according to my work, still has some unfinished business on the downside prior to an emergent new bull phase. My optimal downside target is in the vicinity of 93-95, and although ARKK has declined as much as 18% so far during November, it could have another 10% to 12% downside prior to showing signs of selling exhaustion into the end of the near-one-year corrective process... Last is 105.96."
This past Friday, December 3, when ARKK was trading around 93, a full 12% beneath Mike's November 24th update, he again alerted MPTrader members, writing:
"Unless and until ARKK reclaims 96.80 on a closing basis, we cannot rule out downside continuation to my next optimal target zone at 80-82. That said, however, on any intraday bounce we must watch the form carved out by a rally to help determine if a significant low has been established below 91.66 but above 82. At the moment, ARKK remains very much on the defensive if for no other reason than today's low has been confirmed by Daily Momentum, which warns us that ARKK has more work to do on the downside... Last is 93.09."
Later in the session on Friday ARKK hit a 13-month corrective low at 91.66, accompanied by confirming new lows in Daily Momentum gauges, which continues to indicate that ARKK has unfinished business on the downside prior to putting in a significant and major bear phase or corrective low.
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