Cathie Wood’s ARK Innovation ETF poised to break out of its sideways trading, according to the charts
Investors seem conflicted regarding the popular ARK Innovation ETF (ARKK) of Cathie Wood, which is wound up in a tight consolidation phase in an apparent tug-of-war between buyers and sellers. From a technical perspective, we believe demand will ultimately overwhelm supply for the ETF, allowing for ARKK to lift out of its consolidation phase that has had a hold for several weeks. Short-term momentum is best described as neutral, but intermediate-term momentum is improving, and ARKK has a short-term oversold upturn that favors a breakout from the triangle consolidation pattern. This would occur above $46 in a positive short-term catalyst, although two consecutive closes above the 50-day moving average would also show improved short-term momentum. The consolidation phase in ARKK follows notable underperformance versus the S & P 500 for the first half of 2024. We expect relative strength to improve if the consolidation phase is resolved to the upside, noting that the beleaguered software sector is one of the biggest contributors to underperformance, and its constituents are generally looking better on their charts as they respond to intermediate-term oversold conditions. ARKK itself has a promising upturn in the weekly stochastics, associated with the recovery in software stocks. This suggests the path of least resistance is higher, particularly with important support nearby per the weekly cloud model. By definition “support” is a place of potential buying pressure, so it is a natural place for ARKK to find its footing following its downdraft. For long positions in ARKK, we would consider managing risk through a stop-loss discipline, reducing exposure in the event the consolidation phase resolves to the downside below $42. On the upside, the first major resistance is near $54, but we would reevaluate momentum gauges near the psychologically significant $50 level. âKatie Stockton with Will Tamplin Access research from Fairlead Strategies for free here . DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. 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. 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