ARK Innovation Collapse: Bad Stock Picking Example Or Leading Indicator?

Feb. 19, 2022 12:58 AM ETQQQ, ARKK51 Comments
Michael Harris profile picture
Michael Harris
916 Followers

Summary

  • ARKK drop of more than 56% from all-time highs could be due to investments in high risk stocks.
  • The plunge in ARKK may also be a leading indicator of developments in broader technology sector.
  • If ARKK is a leading indicator, then a large correction may be in store for NASDAQ-100.

silhouette form of bear on technical financial graph

monsitj/iStock via Getty Images

The ARK Innovation ETF (ARKK) has plunged more than 56% from its February 2021 highs in what can be described as "reversion to the mean performance of QQQ ETF" in the same period since

ARKK and QQQ relative performance with linear regression

Relative Performance Chart of ARKK and QQQ Since Inception of the Former. (Price Action Lab Blog)

NASDAQ-100 chart with linear regression line

NASDAQ-100 Daily Chart with Linear Regression Line. (Price Action Lab Blog)

This article was written by

Michael Harris profile picture
916 Followers
Ex-fixed-income quant. Ex-hedge fund quant trader. Worked on developing bond portfolio optimization software and trading systems for commodities and stocks, as a trader for a hedge fund. Author of "Short-Term Trading with Price Patterns" (1999), "Stock Trading Techniques with Price Patterns" (2000), "Profitability and Systematic Trading" (2008), and "Fooled By Technical Analysis" (2016). Michael Harris holds a Master's degree in Operations Research, with an emphasis in forecasting and financial engineering, and another Master's degree in Mechanical Engineering. Website: www.priceactionlab.com

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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