When trying to identify turns in the market and depending on the current market conditions, there are certain issues that are ahead of the broad markets. At this time, ARK Innovation ETF ARKK is one of them and is Monday's PreMarket Prep Stock of the Day.
ARKK's May Low: It is common knowledge that Cathie Wood’s main fund peaked almost a year before the S&P 500, and its meltdown was a precursor to the rout in the high price to earnings to growth stocks.
Not as much attention is paid to the issue leading the market out of the abyss. While the S&P 500 index did not find a tradeable bottom until June 17, Ark bottomed over one month prior on May 6 at $35.10.
That came in just above its March 2020 low ($33) and below its April 2020 low ($39.41). While the issue did once again crater in June, it never made a new low for the move, only falling to $35.65 a few days prior tp the index making its current low for the year.
August Top: The timing of its peak versus the S&P 500 index was as not as pronounced as the bottoming process. Ark pushed through its May high ($52.71), rallying to $53.86 on Aug. 11, and began to retreat.
In comparison, the S&P 500 index did not breach its May high (4,305) until Aug. 16, peaking at 4,327.50 and then reversing course.
PreMarket Prep's Take: After Friday’s steep decline and the follow-through in premarket trading, the “buy the dip” crowd was on full alert.
On Monday’s show, Ark was examined as a candidate for the strategy, When the issue was being covered, it was in the red by nearly $1 at the $42 area.
“Keep an eye on the growth names — they have been your leader over the last 12 months,” said "PreMarket Prep" co-host Dennis Dick.
“If it can find support at the $40 area, there is a chance here on the bullish side.”
The author of this article identified potential support ahead of the $40 area. Investors were alerted that the issue has a series of four consecutive lows from July 12-15 ranging from $42.20-$42.64. The issue, trading at discount to former lows, made it a candidate for the long side if the bulls were able to defend the premarket low. ARKK Price Action: Similar to the S&P 500 index, the issue never came near its premarket low and provided for a lower-risk long off the opening bell.
After a lower open Monday ($41.90 vs. $42.84), it only went another 4 cents lower to $41.86 and staged a solid rebound.
As of 1:30 p.m. EST, it had surpassed Friday’s close, reaching $43.40, and was trading actively in the mid-$42 handle.
The ETF ended Monday's session down 1.61% at $42.13.
ARKK Moving Forward: The Ark ETF has a tendency to put in multiple lows in the same area following an extended decline. Investors attempting to go long the issue may want to wait for another opportunity to purchase the shares closer to Monday’s low, or if attempting a long at the current area, they can lean on that low as a potential exit point if a rally does not materialize.
The discussion on the issue from Monday’s show can be found here:
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