Cathie Wood's ARK Innovation ETF's chart is flashing plenty of bearish signals.
The ARKK Innovation fund is Ark Invest's largest fund. The ETF had just over $8 billion in assets under management as of Aug. 31. The fund has gained a following by betting on companies with disruptive innovation. ARK defines this as "the introduction of a technologically enabled new product or service that potentially changes the way the world works."
The fund's picks include companies working on DNA technologies and genomics, automation, robotics, energy storage, AI and fintech.
Ark Invest's founder, CEO and Chief Investment Officer Cathie Wood unloaded a significant amount of Tesla shares in August and September. As of Tuesday, Tesla was still ARKK's largest holding, with an 11.04% weighting. It is forming a cup-with-handle base.
Next is Zoom Video Communications at 8.35%, Roku at 8.07%, Coinbase Global at 7.94% and UiPath at 7.03%. All those stocks have been weak since September or longer, amid a struggling stock market.
Its sixth largest holding is Block at 4.59%. Block shares lost over 28% in August and 23% in September.
Cathie Wood's ARKK Fund Chart Falls Apart
ARKK shares hit a 52-week high 51.33 on July 19 and have been trending lower since then, marking a series of lower highs and lower lows, a textbook definition of a downtrend.
In August, the ETF had a streak of 12 declines in 13 days before stopping at the 200-day moving average.
A rebound off the 200-day line faded and shares eventually fell below the line. ARK Innovation met resistance at the 200-day line Friday, knocking shares down to the lowest point since May 17 on Tuesday.
The ETF's 50-day moving average has been curving lower. Its bend grew worse as shares ratcheted down 10 out of 11 days in September. ARKK shares are over 11% below the 50-day line, which is an IBD sell signal.
Its relative strength line has been on a steep decline since early August. ARKK's Accumulation/Distribution Rating is a worrisome D-. Its up/down volume ratio is a woeful 0.6, according to IBD MarketSmith. A 1.0 ratio is considered balanced.
How far could the ARKK ETF drop? Shares might find support around 35, where they did in March and May. So a bounce could be just a few points away. The ETF is still up more than 21% year to date, outperforming the S&P 500.
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