In the exchange-traded fund space, one ticker has been as polarizing as they come since 2020 – ARKK. But following more than a year of erratic behavior from Cathie Wood’s flagship vehicle, the ARK Innovation Fund appears to be forming a basing pattern that could herald a breakout ahead. From March 2020 through February 2021, ARKK enjoyed one of the greatest multi-month advances of any large ETF in recent memory, gaining nearly 390% in less than 12 months. It then retraced more than 100% of that move, losing over 80% through its ultimate low in December 2022. ARKK is up 70% over the last 15 months. That’s a sizable move in a short-term time span, but the fund is not on nearly as many radar screens now as it was four years ago. The unbelievable spike and jaw-dropping collapse simply haven’t enticed many investors. Looked at from another perspective, ARKK is net flat since July 2022. (By comparison, the S & P 500 is up 20% from its summer 2022 high.) This means that ARKK would need to gain another 220% from here to get back to those death-defying heights from February 2021. This is how much people care about ARKK now, according to Google Trends. The 100 number on the chart represents the peak interest in February 2021. Currently, people (in the finance category alone) are only 8% as interested in searching for ARKK now. Price action greatly influences sentiment. ARKK has had a quiet 2024 thus far. It’s down approximately 5% year-to-date and has moved sideways for three months. By comparison, the VanEck Semiconductor ETF (SMH) is up 27% in 2024. With so much deserved attention on semiconductors, it’s no wonder why ARKK has flat-lined recently. Bullish pattern developing However, the ETF deserves our attention from a technical perspective since it could be getting closer to breaking out of a two-year basing pattern. ARKK has tried and failed to punch through the noted resistance line near $52 various times – most recently in December. So, why is this effort potentially any different? The pullback since the December high has produced a higher low. And as the chart shows, this has prompted a second bullish formation to be constructed – a big cup and handle pattern. Zooming even further out, the big base has taken shape on top of extremely important support: the COVID lows and the 2018 Q4 low point. The bottom line is this: After ARKK’s round trip two years ago, it has formed a potential large base that seemingly most people don’t care about. If a breakout through the two-year base does occur, the odds suggest that it will get traders’ attention once again. One last interesting factoid: Most investors know that Tesla has a big presence within ARKK. It’s currently 8% of the ETF, which ranks No. 2 behind Coinbase at 10%. Did you know that another Magnificent 7 stock is a holding within ARKK, as well? It’s Meta, but unlike many of the key ETFs it is a part of, Metas weight in ARKK is a minimal 1.7% . If nothing else, it’s important to understand what you’re investing in, especially a very active ETF like ARKK. DISCLOSURES: (None) THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
