Cathie Wood’s flagship ARK Innovation ETF (ARKK) went up 27% (!) in the last 5 days. Of course, this is after losing more than half its value from ATHs.
This begs the question - has it finally found a bottom and is now pivoting to the upside, or does this present a great entry point to bet on on continuing downside?
Reasons to be bullish:
It’s broken out of the downward channel (yellow lines, Fig 1).
It tracks NASDAQ. QQQ has bounced off the $317 bottom three times - if QQQ recovers, will provide positive pull for ARKK.
Most of its positions have fallen precipitously over the last 6 months, some more than 70%. Price/sales is < 10 for 57% of positions (Fig 1). With FOMC passing, can we say rate increases and all that are finally “priced in”?
Reasons to be bearish:
ARKK has relative weakness to QQQ - it is down 46% in 6 months vs 6% for QQQ. Even if QQQ stays flat or rises slowly, ARKK could keep falling.
6 positions bounced by over 30% in the last 5 days. Another 7 between 20% and 30%. There is nothing that materially changed about these stocks in this time. Seems like a dead cat bounce.
Most are still unprofitable - 60% have negative cash flow, and 74% have negative earnings (Fig 1). Market is still very allergic to loss making, high- or negative-PE stocks.
I’m leaning a bit on the bearish side, but not convinced enough to open a put position just yet.
Crowdsourcing ARKK’s fate by June
What do you think? What will be ARKK’s price by June? Please share the why’s in the thread! (1yr price chart in Fig 3 below.)
Have initiated a small 7/15 $59.22P position for $5.65.
Reason: QQQ’s fallen 0.67% today while ARKK has fallen 2.66%. ARKK therefore has relative weakness. Not seeing this as high beta because amplitude of rise is not of a similar magnitude on green QQQ days. If I’m wrong though, will get face ripped off if QQQ rally happens.
Since it has been a month, thought I’d provide an update - ARKK has come down to $53 from $65, and its constituent companies show no signs of stopping sucking as far as stock prices are concerned.
Puts still doing good, may consider rolling into something farther out after earnings are done in a few weeks. Assuming most of the tech heavy holdings will adjust downward, hence waiting to capture that in the puts.
They have all been punished hard, but some still seem to be overpriced. Price/sales is red if > 10, revenue FWD is red if < 20%. Both fairly arbitrary thresholds. This is sorted by earnings date.
U and DNA jump out amongst the tickers coming up soon. Both are great companies, but market is in a mood, so may be fair game. I don’t even recognize more than half the names… need to look them up.
What do you think - which are the best short targets?
ARKK has been one of my top tickers this year, #3 as of today, but I have only been swing trading and scalping. I added a smaller May 20th 45p position yesterday that I plan on holding if possible. Any mild green days next week I’m looking at adding and looking at a slightly deeper June position. With that said, @The_Ni, I love the idea of using this holdings list, lots of Billion+ market caps with negative EBITDA’s
I had a bunch of limit buys set for ARKK and about a half dozen constituents on Friday, but given the market, only one of them filled: 5/20 NTLA 40P for $1.40. Will try again but this time after it’s been a bit of a green day.
ARKK’s week could have gone worse. It’s down less than 3%. As always, it was more volatile than QQQ and ended lower.
Given that TSLA is almost 10% of its holdings, it tracked TSLA pretty closely. TSLA is also under some pressure, not least because Elon has decided to be part-time CEO of three companies now.
This is not the behavior of folks who think “reaching the bottom” is something to fear. So either we’re at the bottom already, or the complacency is real and there is a lot more pain that will be inflicted.
ARKK seems to found some reprieve at last. This is not to say that it is time to buy, but if and when rates start moving the other direction, Cathy Wood’s ETFs may be of service to us again for those leveraged bets on a speculative bet.
