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More Pain for Kathie Wood's ARK Invest ETFs?

Inflationary concerns, seasonality weakness, volatile sector rotations, and the upcoming lack of liquidity during the summer months, will make it more difficult for traders and investors to navigate. Although the stock market has recovered from the market selloff from last week, many technology names and disruptive innovation stocks continue to lag the marketplace.


For instance, Cathie Wood's ARK Invest of innovative and disruptive technology sectors, including artificial intelligence, robotics, EVs, blockchain technology, big data, e-commerce, fintech, 3D printing, and genomics, continue to experience persistent selling pressures.


The flagship and the largest of the ARK Invest ETFs, ARK Innovation (ARKK), has dropped 62.48 points from its all-time high of 159.70 (2/16/21) to a low of 97.22 (5/13/21) or losing 39.12% of its value. On a year-to-date basis, ARKK is off 17.01% and down 10.84% YTD. It is in sharp contrast to SPX and COMPQ, which has rallied 10.84% and 3.81%, respectively.


Although Wood's meteoritic rise has cemented her as one of the hottest fund managers in Wall Street, the recent collapse in ARKK and the other ARK Invest ETFs have many investors questioning Wood's investment approach. The pertinent question remains as to whether this is a temporary correction or something more substantial. Not all investors are concern about the declines in ARKK and other ARK Invest ETFs as they believe in the long-term future of disruptive innovation.


The previous explosive performance in ARKK was due to its concentrated positions on several innovative names such as TSLA (10.18% weighting), TDOC (6.10%), ROKU (5.62%), SQ (4.49%), ZM (4.11%), SHOP (3.91%), Z (3.62%), SPOT (3.52%), TWLO (3.51%), and U (3.36%). The top 10 positions account for 48.42% of the overall ARKK portfolio, at least from a market-cap perspective.


The recent sharp pullback is due to the drops of highly volatile holdings. If you are a Kathie Wood's bull, then the volatilities have created attractive buying opportunities. On the other hand, if you are a Kathie Wood's bear, the selloffs have increased the fears of bubbles developing in high growth names and disruptive technology names.


Enclosed below are charts and key technical levels for ARKK and its top 5 positions.



Source: Charts courtesy of StockCharts.com

Source: Charts courtesy of StockCharts.com

Source: Charts courtesy of StockCharts.com

Source: Charts courtesy of StockCharts.com

Source: Charts courtesy of StockCharts.com

Source: Charts courtesy of StockCharts.com

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