Is ARK Innovation ETF a buy after falling more than 30% from its highs?

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the outdoors, enjoys… read more.
on May 11, 2021
  • ARK Innovation ETF has weakened around 33% off its most recent high of $159.70
  • Upcoming days could bring more pain for the technology sector
  • It is not the best moment for investing in ARK Innovation ETF

ARK Innovation ETF had an incredible return over the past 12 months, but its price has weakened around 33% off its most recent high of $159.70 registered on Feb. 16. Despite this, the price of this ETF continues to trade in a bull zone, and according to technical analysis rules, there is no risk of the bear market for now.

Fundamental analysis: The technology sector remains under pressure

ARKK is an actively managed ETF that seeks long-term growth of capital by investing in companies that could benefit from the development of new products or services, technological improvements in scientific research, industrial innovation, internet technology, and technologies that make financial services more efficient (“Fintech Innovation”). Ark Innovation invests in domestic and foreign equity securities of companies that offer the best risk-reward ratio from ARK’s innovation-based themes.

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ARK Innovation ETF has weakened around 33% from its highs registered in February, while Ark Innovation’s top holdings took big hits this Monday as the Nasdaq Composite fell more than -2.5%. Tesla fell by -6.4%, Teladoc Health dropped by -6.6%, Square fell by -7.3%, Roku -4.9%, and investors continue to sell tech-related companies amid concerns about the rising inflation.

“The issue with ARKK and other speculative growth ETFs is that short-term rallies have been aggressively faded for three months now. The ETF will have to do more than just bounce for a few days to convince traders otherwise,” said Frank Cappelleri, Instinet executive director.

According to FactSet, ARK Innovation ETF has lost about $2 billion this month and hit its lowest point in 2021 amid further selling in innovation stocks. The U.S. economy continues to recover from the pandemic, but recent comments from Treasury Secretary Janet Yellen created a sell-off.

Janet Yellen said that the FED might need to hike the interest rate, and investors have started to behave nervously. The U.S. stock market could weaken even more in the upcoming weeks, and probably it is not the best moment for investing in ARK Innovation ETF.

Technical analysis: ARK Innovation ETF has weakened around 33% from its highs registered in February

Upcoming days could bring more pain for the technology sector, and if this happens, the ARK Innovation ETF will probably be at lower price levels.

Data source: tradingview.com

On this chart, I marked important resistance and support levels. The important support levels are $90 and $80, $120 and $130, represent resistance levels.

ARK Innovation ETF has weakened around 33% from its highs registered in February, and for now, the upside for this ETF remains limited. If the price falls below $80, it would be a strong “sell” signal and a sign of positive trend reversal.

Summary

ARK Innovation ETF has weakened around 33% from its highs registered in February, and probably it is not the best moment for investing in this ETF as the technology sector remains under pressure. Ark Innovation’s top holdings took big hits this Monday; Tesla fell by -6.4%, Teladoc Health dropped by -6.6%, Square fell by -7.3%, Roku -4.9%, and investors continue to sell tech-related companies amid concerns about the rising inflation.

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