Bull market heroes often become bear market villains.
Nobody knows this better than Cathie Wood, CEO of Ark Invest.
From March 2020 to February 2021, Wood’s flagship fund – the Ark Innovation ETF (ARKK) – went on an incredible run.
ARKK ran from a March 2020 low of $33 to a high of over $159 by February 2021. That’s an incredible 384% move.
ARKK was the definition of peak bull market mania.
Investors flocked to the fund, eager to buy into Wood’s vision of the future.
The holdings in her ETF were all selected because of their ability to change the way the world works.
Tesla, for example, makes up about 10% of the entire holdings. Wood believes that Tesla is the future of human transportation, with its coming fleet of robo-taxis completely disrupting the auto and rideshare industries as we know them.
Unfortunately, investors have been losing faith in Wood’s stock-picking strategies.
Since putting in its $159 high, ARKK has sold off as much as 81%, eventually finding a bottom in December 2022.
This brings us to the current year, where ARKK has been volatile once again. The ETF started off the year on a very strong note, even rallying almost 55% between January and February.
Since then, however, ARKK has given back as around half those gains.
And right now, my technical analysis of ARKK suggests that there’s another big move just around the corner.
Let’s look at a price chart of ARKK so I can walk you through what I see.
This price chart has a constellation of important moving averages (MAs) all trading in a very tight range of prices.
We’re looking at the 20-, 50-, and 200-daily MAs. Notice how they’re all clustering tightly together. This means that the market is gearing up for an explosive move, either higher or lower.
Here’s how either scenario could play out…
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The bullish case would see the market punch through all three MAs, clearing the way for a much bigger move to the upside.
In this scenario, the market will likely run as far as it did during its late December 2022 to early February 2023 rally.
At that time, ARKK rallied by $14.77 or almost 50%. An equivalent rally this time would see ARKK trading around $49.50.
On the other hand, the bearish case would see ARKK break down below the December 2022 low of $29.64.
In this scenario, the MA constellation will serve as resistance, effectively putting a lid on any immediate upside.
The good news is that while both scenarios are possible, the market will let us know in just the next few days which way prices will break.
Either way, there’s a great trading opportunity at hand.
Are you bullish or bearish on ARKK? Did you trade ARKK during its pandemic boom?
Let us know your thoughts – and any questions you have – at [email protected].