It’s not only the market’s most-shorted stocks going down this week. The bears are seemingly everywhere. And the additional selling pressure hasn’t been without cause.
But if investors want to feel slightly less miserable about their own portfolio’s performance, look no further than Cathie Wood and heavily shorted Ark Invest growth stocks.
Then and more importantly, consider a purchase or two. Let me explain.
The roar of a bear is upon many investors 401(k)’s and other financial accounts tethered to Apple (NASDAQ:AAPL), Home Depot (NYSE:HD), Boeing (NYSE:BA) and other market heavyweights.
Inside Friday’s session the broad-based, large-cap S&P 500 is on pace to finish out the week down 1.50% after briefly flirting with February’s corrective low on Tuesday.
Then of course, there’s the Nasdaq. The tech-focused bellwether is back tangling with a bear market some 20% removed from its late November all-time-high.
But while macro risks tied to the overseas conflict, inflation and interest rates chip away at those market’s dazzling returns of the past two years, you’ll get little sympathy from investors involved in a market made up of many other stocks.
And that’s particularly true if those decisions reflect owning some of the market’s most-shorted stocks, which also happen to be downtrodden Ark Invest stocks.
Today though, based on what we’re seeing today in three of those most-shorted stocks and fear running favorably rampant, rather than miserably commiserating, investors might consider the option of happily buying.
Ark Invest Most-Shorted Stocks to Buy: Block (SQ)
Source: Charts by TradingView
The first of our Ark Invest plays to buy which also happens to be among the market’s most-shorted stocks is Block.
The fintech giant has been through a grueling bear market since hitting an all-time-high of $289.23 last August. Without question, that’s also provided big-time bank for some of SQ stock’s 10% bearish short interest.
But after suffering through a correction which saw this Ark and most-shorted stock down as much as 71% in February, there’s reasons to believe today’s bears are being greedy.
SQ’s monthly chart reveals an oversold stochastics narrowly signaling a bullish crossover. It’s the first such occurrence since the bear market cycle began.
What’s more, with last month’s most fearful behavior testing key Fibonacci and trend line support and reversing to form a bullish hammer doji, SQ stock looks like it’s at the intersection of growth meeting value.
I’d recommend a modestly out-of-the-money intermediate-term bull call spread or similar synthetic vis-à-vis a SQ collar on this most-shorted stock.
DraftKings (DKNG)
Source: Charts by TradingView
The next of our Cathie Wood, Ark Invest most-shorted stocks to buy is DraftKings.
The fantasy sports and online betting champ has been a losing proposition for investors wagering on the bulls to win. Shares have slid as much as 75% since peaking last March.
That, of course, has provided a slam dunk opportunity for at least a few of DKNG stock’s 13% bearish short interest.
Today though and bearish action turning into extreme technical “March Madness” on the monthly chart of this most-shorted Cathie stock, it’s no time for bulls to be throwing in the towel.
To avoid always possible downside risk should February’s hammer fail, an actively-managed collar or slightly less-out-of-favor long May or July $20 call are smarter money bets, off and on the price chart, to play the “the over” in this most-shorted stock.
Ark Invest Most-Shorted Stocks to Buy: CRISPR Therapeutics (CRSP)
Source: Charts by TradingView
The last of Cathie Wood’s most-shorted stocks to buy is CRISPR Therapeutics.
For once in a long while, CRSP stock’s bulls are doing something other than turning tail. Shares are up nearly 18% this week.
But don’t think it’s too late get in on the action in this next-gen genomics stock. The only investors late to the party are bears looking to add to this most-shorted stock’s short interest of around 16%.
Behind this week’s bid, CRISPR has benefited from an interview with CRSP’s CEO at Cowen’s Annual Health Care Conference and an upbeat discussion of the outfit’s pipeline and business in general.
And today the price chart in this most-shorted Ark Invest stock is also confidently expressing that better days are ahead for CRSP shares.
Currently, shares are still more than 70% removed from last January’s all-time-high. But the real value in this most-shorted stock versus simply being cheaper, is this month’s still forming inside hammer candlestick.
Backed by CRSP’s Covid-related 76% retracement level and long-term trend support and shares also signaling an oversold bullish crossover, the monthly chart looks ripe for a bull market recovery.
Bottom-line though and particularly important with riskier biotechs, a fully-hedged collar or bull call spread equivalent is the treatment plan of choice for this most-shorted stock.
On the date of publication, Chris Tyler holds long positions (either directly or indirectly) in Ark Innovation ETF (ARKK) and Ark Genomics Revolution ETF (ARKG). The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
