Back to the list

Expert Explains Why ARK Invest's Flagship ETF Sold TSLA Shares for First Time Since October 18

source-logo  cryptoglobe.com 04 July 2024 01:52, UTC

In a recent video update, fiance guru Kevin Paffrath, best known as the host of the YouTube channel Meet Kevin, delves into the reasons behind Cathie Wood’s recent decision to sell a significant amount of Tesla stock (NASDAQ: TSLA).

Kevin begins by questioning why Cathie Wood, Founder and CEO of ARK Invest, is selling Tesla stock, especially when the stock has recently been experiencing significant gains. Kevin notes that ARK Invest sold 56,000 shares of Tesla to invest in Archer Aviation and other stocks.

According to a report by MarketWatch, Wood’s flagship Ark Innovation ETF (ARKK) sold 56,425 Tesla (TSLA) shares on Tuesday, valued at $13.05 million based on Tuesday’s closing price.This sale does not indicate a change in strategy, as Tesla remains the ETF’s largest holding with a 14.6% weighting, valued at $891.89 million as of Wednesday morning. However, it marked the ETF’s first sale of Tesla shares since October 18, 2023.The sale occurred after Tesla’s stock closed at a six-month high on Tuesday, following strong second-quarter delivery data.

Kevin suggests that this move might be due to Tesla reaching a critical resistance point that has historically caused pullbacks. Kevin explains that Tesla’s volatility was at a low when the stock was around $170 to $180, indicating potential for significant gains. According to Kevin, even a novice technician would recognize that Tesla is at a major resistance point, which could lead to a temporary pullback. Kevin emphasizes that while Tesla might experience short-term volatility, the long-term potential remains strong.

Kevin highlights several economic indicators that Wood might be considering, such as slowing personal consumption, capital goods purchases, and rising jobless claims. Kevin also points out the increase in the 10-year treasury yield and the spiking SOFR rate as signs of underlying stress in the economy. Kevin suggests that these factors could contribute to a cautious outlook.

Kevin touches on the performance of Bitcoin, noting a bearish double top pattern and the potential impact of ETF flows. Kevin emphasizes that while Bitcoin’s price movements are concerning, the broader market shows mixed signals with extreme greed in market momentum.

Kevin discusses the potential for a short-term pullback in Tesla stock due to its high relative strength index (RSI) and the possibility of a “buy the rumor, sell the news” event surrounding the robo-taxi announcement. Kevin advises caution, noting that high interest rates and a potential pullback could impact Tesla’s performance in Q3.L

Despite the short-term concerns, Kevin remains long-term bullish on Tesla. Kevin believes that once Tesla breaks through the current resistance level and navigates through Q3, the stock could reach new highs. Kevin emphasizes the importance of being prepared for potential market volatility and maintaining a long-term perspective.