Author: Kenley Scott

Key Points:

• Nasdaq 2000–2002 versus ARKK (and other hyper-growth in general) still holding.
  • Third leg lower for ARKK totaled -51% over seven weeks versus 44% over 11 weeks for Nasdaq.
  • The subsequent Nasdaq rally was +44% over eight weeks, including +9% on the first day. ARKK is already up 25% from lows in just two days.
• Nasdaq also had a follow-through day (FTD) on day 4 in April 2001 and rallied another 25% from there. Rally failure signs began with clustering of distribution and a new breach of the 50-DMA.
  • During its rally, stocks that fell the most rallied the hardest. For example, AMZN and NTAP, which were down over 90% from highs, more than doubled from lows.
  • Still, those very volatile rallies faded after 4–8 weeks. A better approach is to look for leadership and stocks near highs with rising RS lines. Examples include HR & Block and Flir Systems, which made new highs very quickly after the market bottomed and went on to lead for more than a year after that.
  • In the current market, examples of extremely oversold stocks which could lead short-term include AFRM, COIN, ASAN, CVNA, ZM, PTON, etc.
  • Examples of those in positions to lead long-term include CF, DVN, OXY, SQM, HRL, IRM, AVGO, MAT, LNTH, SMCI, PAG, and FCN.

Encavis AG (ECVX.DE; ECV:GR) – $4B market cap – Technicals: The stock is slightly extended above its key moving
averages after recently breaking out of a cup-with-handle base. It has a strong fundamental profile with EPS Rank of 75
and SMR Rating of B and strong technical ratings like an A/D Rating of A and RS Rating of 92. Accumulate on a lowvolume pullback to its 21-DMA.

Key Points:

• Nasdaq 2000 top vs ARK Innovation (ARKK) and others within the hyper-growth style continues to play out in similar fashion.
  • Charts including the timeframe and magnitude of runup, the time/magnitude of the first drop and first failed rally attempt, and time/magnitude of the second drop remarkably similar.
• Now, the rally attempt after the second major low was +30% over four weeks for the Nasdaq while it has been +38% over three weeks for ARKK.
• From there, the Nasdaq failed to hold a retake of the 10-WMA and was back at lows within four weeks. It would then fall another 29% over seven weeks to the ‘third leg’ lows. Similarly, ARKK is back at lows over just three weeks, after having failed to hold a retake of the 10-WMA.
  • Similarities of group outperformance between then and now include Agricultural Operation, Beverages-Alcoholic, Retail-Food Chain, Oil&Gas-Integrated, and Tobacco.
  • Similarities of group underperformance between then and now include Computer-Data Storage, Computer Software, Electronic Manufacturing/Instrumentation, Internet, and Semiconductor.

Encavis AG (ECVX.DE; ECV:GR) – $4B market cap – Technicals: The stock is slightly extended above its key moving averages after recently breaking out of a cup-with-handle base.

In the case of gold (GLD), prices had tested all-time highs after breakin clearly above a downtrend line which had
been established since August 2020. Throughout a four-week pause, volume to the downside has been light, and
this week has seen a strong bounce from the rising 10-WMA