ARWK: A Crypto Beneficiary In ’23, Bullish Momentum ’24 (NYSEARCA:ARKW)

2023 was a outstanding yr for something associated to tech and crypto. Funds closely invested in these niches loved large positive factors, but in addition some volatility alongside the best way. Nonetheless, it was Bitcoin and the Info Know-how sector that sported one of the best whole return and risk-adjusted returns, in line with Goldman Sachs. All advised, crucial cryptocurrency rose $17k to about $42k by late December whereas the I.T. slice of the S&P 500 was the main sector, up greater than 50%. These two areas are key for one web fund.

I reiterate my purchase ranking on the ARK Subsequent Era Web ETF (NYSEARCA:ARKW). Whereas it encompasses a excessive valuation, I assert this ETF is a stable play for momentum traders in 2023.

High of the Pack in 2023: Bitcoin & Tech

In line with the issuer, ARKW is an actively managed ETF that seeks long-term progress of capital by investing below regular circumstances primarily (at the very least 80% of its belongings) in home and U.S. exchange-traded international fairness securities of firms which can be related to the fund’s funding theme of next-generation web. The issuer believes firms inside this ETF are targeted on shifting know-how infrastructure to the cloud, enabling cellular, internet-based services and products, new cost strategies, large information, synthetic intelligence, the Web of Issues, and social media.

ARKW has grown in measurement since I first reviewed the ETF in the course of 2023. Whole belongings below administration now sum to about $1.8 billion, although the growth-focused fund doesn’t pay a dividend. ARKW can also be on the costly facet, given its excessive annual expense ratio of 0.87%. Nonetheless, share-price momentum could be very sturdy following a outstanding rally off a low notched in late October together with the broad fairness market. I’ll element essential worth ranges to look at later within the article. Liquidity is blended with ARKW – common each day buying and selling quantity is greater than 250k shares and its 30-day median bid/ask unfold is eight foundation factors, so utilizing restrict order throughout sluggish intervals within the buying and selling day is prudent to keep away from dangerous fills.

Digging into the portfolio, the 1-star, neutral-rated fund by Morningstar plots on the far-right facet of the type field, indicating a excessive weight in progress equities. Simply 4% of the allocation is taken into account worth. What’s extra, greater than three-quarters of ARKW is small or mid-cap in measurement, including to potential danger. Worth traders will doubtless shun the ETF, given its excessive 37x price-to-earnings a number of and a price-to-sales metric of virtually 4. However with long-term EPS progress of greater than 16%, there are earnings to again up the lofty worth.

ARKW: Portfolio & Issue Profiles

Potential traders should acknowledge that ARKW is sort of concentrated. It’s largely a tech and even partly a fintech fund. Greater than two-thirds of the portfolio is within the I.T. or Communication Companies sector. Of the 11 market sectors, the fund holds shares in simply six of these areas. Furthermore, the highest 10 positions comprise a excessive 63% of the portfolio, so monitoring basic and technical circumstances with Coinbase (COIN), Block (SQ), and Roku (ROKU) is essential.

ARKW: Holdings & Sector Breakdowns

Seasonally, ARKW tends to start out the yr sturdy, rallying greater than 5% by mid-February earlier than volatility generally strikes over the again half of the primary quarter, in line with information from Equity Clock. Nonetheless, the fund has a really sturdy observe report, although a extreme drawdown of greater than 80% left many traders with main losses in the course of the 2021-2022 bear market.

ARKW: Bullish Early-Yr Development, Late Q1 Volatility

The Technical Take

Again in July, I highlighted a key bullish reversal signature happening in ARKW. Certainly, the ETF typically rallied over the second half of 2023, however a cloth pullback to assist within the excessive $40s came about, providing a good entry level. Discover within the chart beneath that the higher $60s was key resistance. That spot was the demarcation line for a long-term bearish to bullish reversal sample. The fund lastly broke out just some weeks in the past, and I see a bullish upside measured transfer worth goal to $100 primarily based on the peak of the bullish rounded backside reversal sample that hit a low of $36 on the flip of 2022 to 2023. Add the $32 peak on high of the $68 breakout level, and also you get the $100 goal.

Additionally check out the long-term 200-day transferring common – it’s positively sloped, indicating that the bulls are in command. I additionally like that shares are working off technical overbought circumstances, evidenced by the RSI momentum oscillator on the high of the graph.

For now, lengthy with a cease below about $65 seems as a good risk-reward play, focusing on the excessive $90s.

ARKW: Bullish Upside Breakout, Goal to $100, $68 Assist

The Backside Line

I reiterate my purchase ranking on ARKW. I see excessive momentum within the fund. At the moment, ranked no. 4 out of 83 in its In search of Alpha Sub Class, the ETF is one to look at for additional positive factors in 2024.