The charts of Tesla, Ark and bitcoin all show the same big warning for investors
by James · October 11, 2022
The charts of bitcoin, Tesla and the Ark Innovation ETF all show the same thing: That the market for some of the riskiest holdings is at an inflection point. It could also be a warning sign for the wider market. Jonathan Krinsky, chief marketing engineer at BTIG, says all three are testing key map areas that look ready to break, and are taking prices lower. They are all on the “cusp of key cracking areas,” he says. Tesla is trading just above the important $220 level. Ark fell below the key $35 level on Tuesday, and bitcoin is nearing a test of $18,000, Krinsky notes. “They were leadership on the way up… They’ve generally led to the downside,” Krinksy said. Krinksy said the group’s behavior supports his call for more downside for the S&P 500, which hit as low as 3,568 on Tuesday. “I think the S&P 500 is vulnerable to 3,400,” he said. “I’m not bearish on the S&P just because of these charts, but they add to the conviction.” Bitcoin, just above $19,000 on Coin Metrics, could fall to $14,000 if the $18,000 level doesn’t hold, he said. “I think that speaks to the Nasdaq, and I think that will eventually translate to the S&P 500,” said Todd Sohn, technical analyst at Strategas. “The weakness from one area will trickle down to the S&P.” Sohn described Ark, bitcoin and Tesla as emblems of the “speculative corner of the market.” “Ark and bitcoin bottomed earlier this summer and they’ve kind of tread water since. Now they’re starting to approach those lows again,” Sohn said. “It’s a new test, and the pressure is on.” Ark Innovation has been a poster child for the most risky subjects. “My expectation is that they all break,” Krinksy said. “If you look at the Ark chart, it’s the fifth time we’re testing $35, $36. Usually there’s nothing like a triple bottom, let alone a five-fold bottom. The more times you test a level, the more likely you’re going to break. ” Sohn points out that the Nasdaq fell to a two-year low on Monday. He said it is the first time the index has carved out a new low over a rolling 2-year period since 2008. Like the Nasdaq, trading in Ark, Tesla and bitcoin is tied to the direction of interest rates. “I think those are three keys to longevity,” Sohn said. “You could say they’re a bit of an indicator of interest rates. If interest rates come in, they’ll at least try to bottom out and improve. That could be quite an indicator that maybe interest rates are starting to stall.” Sohn noted that the iShares 20+ Year Treasury Bond ETF, which acts as a proxy for the bond market, hit a new 11-year low on Monday. The closely watched benchmark 10-year Treasury yield reached 4% in overnight trading and recently stood at 3.89% late Tuesday morning. Sohn noted that $206 was Tesla’s May low, and if it falls through that, it could fall into the low $100s. “If Ark undercuts $35, you’re looking at $30. It’s back to the Covid low,” he said. Bank of America’s chief technical strategist Stephen Suttmeier has also been keeping a close eye on Tesla. He says it is on “head and shoulders top collapse watch.” This chart formation signals more negative action that could take the stock to $100. “A decisive break below 216-206 would confirm the top of the head and shoulders and suggest deeper downside risk to chart the supports at 180 and 167 along with rising 200-week [moving average] near 156 and the log scale pattern count in the 100 range,” Suttmeier wrote. –CNBC’s Michael Bloom contributed to this story
