Cathie Wood-Led ARKK Falls Under Key Bellwether, Reaches Oversold Territory: This ETF Offers A 200% Return On A Bounce

Cathie Wood-led ARKK Innovation ETF ARKK was popping up slightly higher on Wednesday but trading within an inside bar pattern to consolidate.

The ETF plunged 15% between Sept. 12 and Tuesday, losing support at the 200-day simple moving average (SMA) on Sept. 21, which threw ARKK into a possible bear cycle. The move lower came amid a selling spree, where the ETF sold 171,617 shares of Tesla, Inc TSLA between Sept. 19 and Sept. 21.

At least a temporary bounce is likely in the cards for ARKK, however, because the recent sharp downtrend has dropped the stock into oversold territory on the daily chart.

Looking For A Leveraged Option To Play ARKK To The Upside? Traders and investors looking for leveraged long exposure to ARKK can play the AXS 2x Innovation ETF TARK.

TARK is an actively managed 2X leveraged ETF aiming to return 200% of the daily performance of ARKK. This leverage boosts trade performance, which can offer significant gains for traders.

Read more about TARK here...

Through trading TARK, investors benefit from upswings in ARKK, which holds stocks in industries such as electric vehicles, next-gen Internet, genomics and fintech. ARKK’s largest holdings are Tesla, weighted at 10.89%, Roku, Inc ROKU, weighted at 7.9% and Zoom Video Communications-A, which makes up 8.27% of the fund’s holdings.

It should be noted that leveraged funds are designed for short-term traders and shouldn’t be held for a long period of time.

Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.

The ARKK Chart: ARKK started to consolidate sideways when its relative strength index (RSI) dropped below 30%. When a stock’s or ETF’s RSI falls under that area, it becomes oversold, which can be a buy signal for technical traders.

• On Wednesday, ARKK’s RSI was popping up to about 31%. If the RSI continues to climb upwards, it will indicate momentum is returning to the ETF, which sometimes precedes a longer-term uptick in share price.
• Bullish traders want to see ARKK’s RSI continue to increase and then for the ETF to regain the eight-day exponential moving average as support. If that happens, the ETF is likely to find more solid resistance at the 200-day SMA.
• If ARKK continues to trade mostly sideways on decreasing volume, the ETF may be settling into a bear flag pattern on the daily chart. If that plays out, bearish traders can watch for big bearish volume to come in and drop the ETF to new lows.
• ARKK has resistance above at $41.29 and at $43.83 and support below at $37.93 and at $34.97.

Image sourced from Shutterstock