spreck

ARKK Potential mean reversion pullback/correction

Short
AMEX:ARKK   ARK ETF TR INNOVATION ETF
ARKK price sitting a +3 standard deviations above identified linear regression mean with a potential RSI divergence identified signaling a possible pullback or correction to levels of support.

Linear regression analysis
  • ARKK's current bull trend beginning on MAR 18 2020 has been well identified
  • A linear regression trend pulled to current date gives a Pearson's R maxed at 0.97634... indicating a strong correlation
  • Current price is sitting at +3 standard deviations ( SD ) above linear regression mean

RSI Divergence
  • RSI divergence identified from DEC 23 2020 - JAN 15 2021 levels
  • As per my own RSI strategy, I overlay fibonacci retracement levels on my RSI indicator
  • Previous observations indicate that a price break below the 0.618 RSI level corresponds to a break of identified areas of support when found with a divergence of price action
  • Support at RSI range of 48-52 could correspond with a retest of some region of price action support

Cumulative analysis
As price action continues to make higher highs and RSI continue to make lower highs, I am looking for a pullback or potential correction to coincide with a potential mean reversion. Using RSI bearish divergence as a signal, I have a higher degree of confidence that this will occur.
Using fibonacci extension /retracement levels as well identified areas of support and resistance as they correspond to linear regression mean and SD areas, key areas of support appear to be at approximately $141.50, $138, and $131.

I will be watching price action over the next few days to watch for confirmation or rejection of this analysis as RSI is still in a bullish range and volume could certainly continue to push price higher and invalidate the currently observed possible divergence signal. A bullish move and breakout of ATH could see a move to $156.
Trade closed: target reached: Trade closed.
Support found at $138.
Closed short positions just before market close on JAN 27.

Comments

I like your setup. It's combined statistics as well as traditional technical analysis.
+1 Reply
Excellent analysis sir. Keep it up.
+1 Reply
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