ARK stocks 'have been beaten to a pulp' in recent tech slide, strategist says

Michele Schneider, Marketgauge.com Partner and Director of Trading Research & Education, joins Yahoo Finance's Jared Blikre to deliver some technical analysis on tech stocks, the Nasdaq, transportation ETFs, cyclical stocks, China stocks, and bitcoin.

Video transcript

- 2022 has obviously brought some early weakness to some of those favorite plays in 2021, including the tech sector. And for more on that, it's time to get technical here. We've got Yahoo Finance's chart master, Jared Blikre, standing by with a very special guest. Jared.

JARED BLIKRE: That's right, we have Michele Schneider here from marketgauge.com. And Mich, it's great to see you, as always. We've got to start out with the Qs. This tracks the NASDAQ 100. And I'm going to put a one-year chart on the YFi Interactive, then change this over to candlesticks, because that's how we read the market. What are you making of this recent bout of selling? Because it looks like we're right back down to potential support that has held below, but this top could be a little bit concerning here, if it is a top.

MICHELE SCHNEIDER: Well, first of all, the whole idea of higher interest rates I think is one of the biggest factors going into not only NASDAQ, but also the tech space in general. And we've already seen that some of the other tech stocks, the more disruptive tech stocks, particularly in the ARK fund, have just been beaten to a pulp. So the fact that we're seeing some of these big growth names react to the idea of higher rates is probably a reflection of the fact of how well they've done because they've had free money for the last 12 years.

And so at some point, I think it would be good for them to find a truer value. You look at something like Apple that hit 3 trillion, and then when you look at the fact that the earnings revenue was predicted as 30 times the reality, and we're getting into earnings season, no surprise that you're going to see these stocks come off. But the question is, is it going to establish a trading range? And that's really what I think we're seeing here all across the board.

Last time you and I spoke, Jared, we talked about the Russells having a trading range, going back from February 2021. So I think the good news is a trading range could get established. And if it's not going to stop at 380, maybe it stops at 360 or 350. I don't think we're going to get more negative than that.

But the idea of going to new highs, I think we can kind of put that on the table right now, as we're seeing a whole sea change coming into 2022. And so if you're a range trader, you've got to be pretty quick. Get in at these dips, but get out if they break. And as you get some kind of rally, you have to take profits here. And I think sitting back and just watching these things continue to develop, going up and up and up, those days are over.

JARED BLIKRE: Oh, bad news there. But we're also checking out the transports. Now, transports have picked up recently, especially it looks like in the latter part of December. I'm looking at a one-year chart right now on the YFi Interactive. But we couldn't punch through these highs that we established last May, and also last fall, it looks like. What are you seeing in the transports right now?

MICHELE SCHNEIDER: Well, completely the opposite of what we're seeing in NASDAQ, which means maybe cyclically they've had their day. Transportation, which has relatively underperformed the markets for a long time now, are very close, as you just pointed out, to the all-time high. And so from a technical standpoint, we get through 280, 282, it's really possible that we can go to 300, or even 320. But if we look at it from what it means for the actual economy, it's the most encouraging place to say that perhaps we will see better growth than what's anticipated right now because it reflects the demand side.

So it means COVID, people are sensing that, at some point, that's all going to go away. People will be traveling more. The demand of goods will continue to rise. Maybe cruise lines will come back. These are all the things that are inside the IYT. And what's holding up right now, of course, are some of the railroads, and even some of the delivery services, like UPS and FedEx, which are very busy with Christmas returns. So I'd say I vote for that as the most promising sector for 2022.

JARED BLIKRE: And also kind of a cyclical play here, too. And I've noticed that a lot of the railroads have been hitting record highs recently. But I want to shift gears here and get to China, where we all know what has happened to shares in China. This is a picture of FDN-- or FXI, excuse me. We have this over the last two years. Now, you take a look at what's happened over the prior year, down 22%. And that is from the upper left to the lower right. Not what you want to see if you're a bull here.

MICHELE SCHNEIDER: Well, right, but the question really is, is all the bad news finally out of China, between regulation and monopolies and just the big mess of Evergrande, and everything else that impacted China? Is it over? Charlie Munger seems to think so because he's been buying lots of shares of Alibaba. But I've been interested in FXI for a few reasons.

One is we're getting into a new Chinese New Year. Two is the Winter Olympics are there. And three is that it hit an incredibly major support level on a monthly chart going back from 2005 here at around the $35 level. So 3660 is where we closed out December. I think this is a good area to watch. And it may be that the worst is over for China, and it's actually a good stock to buy, with a good risk line under 35.

JARED BLIKRE: Interesting. Before we go, are you able to talk crypto, maybe a little Bitcoin with me?

MICHELE SCHNEIDER: Absolutely, yeah. So we have-- we-- I mean, basically here we have 39,000, 40,000 as the rock bottom support. And a lot of people, and myself included, would get much more defensive if we break that level, because then we can easily see 30. If we see 30, I think that's an incredible opportunity to buy.

On the flip side, we can hold here. And there's some institutional buying starting to come in, and we're stabilizing. We get back through, say, 43, definitely through 45, then there we go back up to testing the most recent highs at 52, and then back up to 69. And people are still predicting 100,000. It's certainly within the realm. But right here is probably a good time to sit back and watch and see what's developing.

JARED BLIKRE: I love all your comments here. Thank you for joining us. Once again, Michele Schneider, marketgauge.com partner. Zack, we kick it back to you.