ETFs
Cathie Wood’s ARK Innovation ETF Is About to Break Out of Its Sideways Trend, Charts Show
Investors appear to be split on Cathie Wood’s popular ARK Innovation ETF (ARKK), which is in a tight consolidation phase amid an apparent tug-of-war between buyers and sellers. From a technical perspective, we believe demand will eventually outstrip supply for the ETF, allowing ARKK to break out of its multi-week consolidation phase. Near-term momentum is best described as neutral, but medium-term momentum is improving and ARKK is experiencing a near-term oversold rally that favors a breakout of the triangle consolidation pattern. This would occur above $46 in a positive near-term catalyst, although two consecutive closes above the 50-day moving average would also show improving near-term momentum. ARKK’s consolidation phase follows notable underperformance versus the S&P 500 for the first half of 2024. We expect relative strength to improve if the consolidation phase resolves to the upside, noting that the struggling software sector is one of the biggest contributors to the underperformance, and its constituents generally look better on their charts as they react to oversold conditions in the medium term. ARKK itself is seeing a promising recovery in the weekly stochastics, coupled with the recovery in software stocks. This suggests that the path of least resistance is higher, especially with significant support nearby according to the weekly cloud pattern. By definition, “support” is a place of potential buying pressure, so it’s a natural place for ARKK to find its footing after its decline. For long ARKK positions, we would consider managing risk through stop-loss discipline, reducing exposure in case the consolidation phase resolves lower below $42. On the upside, the first major resistance is near $54, but we would reassess momentum indicators near the psychologically significant $50 level. —Katie Stockton with Will Tamplin Access Fairlead Strategies’ research for free here. DISCLOSURES: (None) All opinions expressed by CNBC Pro contributors are solely their opinions and do not reflect the views of CNBC, NBC UNIVERSAL, their parent or affiliated companies, and may have been previously broadcast by them on television, radio, the Internet or other media. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO PURCHASE ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT THE UNIQUE PERSONAL CIRCUMSTANCES OF ANY INDIVIDUAL. THE CONTENT HEREIN MAY NOT BE TAILORED TO YOUR PARTICULAR SITUATION. 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