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Analysis of ARKK - 9 May 2022
10 May 2022 (392 views)  

The Nasdaq dropped by 4.29% on 9 May. ARKK, which is the flagship ETF managed by Cathie Wood, dropped by 9.86%. This is twice the drop of the Nasdaq index.

I have observed on several past occasions, that the component stocks of the ARKK fund dropped much more than the Nasdaq index on days when the stock market is extremely weak. 

I suspect that this is the result of short selling. 

The top holdings of the ARKK fund are shown below, representing 52.2% of the holdings in the ETF.

The drop in stock price for the day range from 4.19% for ZM to 19.5% for COIN. 

The percentage of outstanding shares that are shorted range from 1.93% for SPOT to 15.32% for TDOC. The stocks that are highly shorted (i.e. more than 5%) are TDOC, SQ and ROKU.

There is another ETF that was created recently with the goal of taking short bets on the stocks owned by the ARKK stocks. This ETF is called SARK. It gained 9.68% for the day, compared to a loss of 9.86% for ARKK.

It is likely that the SARK ETF sold many of the components stocks in the ARKK ETF. This drop caused the other shareholders of the shorted stocks to sell their shares, leading to a severe drop in price. 

If this is likely to be the trading behavior for a weak stock market, it may be a good strategy to buy the SARK fund on these days. 

However, there is another possible trading strategy. The short traders will need to close their position in the shorted stocks within a few days or weeks. This will lead to a rise in the value of these stocks. 

Tan Kin Lian




 


Analysis of ARKK - 9 May 2022
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The Nasdaq dropped by 4.29% on 9 May. ARKK, which is the flagship ETF managed by Cathie Wood, dropped by 9.86%. This is twice the drop of the Nasdaq index.

I have observed on several past occasions, that the component stocks of the ARKK fund dropped much more than the Nasdaq index on days when the stock market is extremely weak. 

I suspect that this is the result of short selling. 

The top holdings of the ARKK fund are shown below, representing 52.2% of the holdings in the ETF.

The drop in stock price for the day range from 4.19% for ZM to 19.5% for COIN. 

The percentage of outstanding shares that are shorted range from 1.93% for SPOT to 15.32% for TDOC. The stocks that are highly shorted (i.e. more than 5%) are TDOC, SQ and ROKU.

There is another ETF that was created recently with the goal of taking short bets on the stocks owned by the ARKK stocks. This ETF is called SARK. It gained 9.68% for the day, compared to a loss of 9.86% for ARKK.

It is likely that the SARK ETF sold many of the components stocks in the ARKK ETF. This drop caused the other shareholders of the shorted stocks to sell their shares, leading to a severe drop in price. 

If this is likely to be the trading behavior for a weak stock market, it may be a good strategy to buy the SARK fund on these days. 

However, there is another possible trading strategy. The short traders will need to close their position in the shorted stocks within a few days or weeks. This will lead to a rise in the value of these stocks. 

Tan Kin Lian