Arista Networks Is In a Sharp Decline With No Nearby Support

Let's jump into the charts to see if there is a point or level where we might consider buying.

Arista Networks (ANET) is the 'Stock of the Day' at Real Money, and it is plunging this Friday as traders react to its Q3 earnings report and the sharp downside revenue guidance.

Arista Networks builds scalable, high-performance and ultra-low latency cloud networks but it lost a cloud titan customer and cut its guidance.

In this daily bar chart of ANET, below, we can see that prices have been in a decline from a peak back in April. Price weakness is not new to traders and investors. ANET shares did show some improvement earlier this month as the slope of the 50-day moving average line turned positive and the 200-day moving average line continued its gradual rise from July.

Trading volume did not increase in October, telling us that there was not a strong commitment to upside. Once again the old tool of price and volume tells a story that still works in 2019 - you need to see to volume increases in the direction of the trend.

The On-Balance-Volume shows a decline from April and that signals to us that sellers of ANET have been more aggressive for several months.

The Moving Average Convergence Divergence is slightly above the zero line but that should turn bearish with today's sharp price weakness.  

 

 

In this weekly bar chart of ANET, below, we can visualize that prices will test and probably break the 2018 low around $180. Prices have been below the flat 40-week moving average line for several weeks.

 

The weekly OBV line has been neutral to bearish since the beginning of 2018 and the big picture of this chart is a large distribution or topping pattern since late 2017. The MACD is below the zero line and the two averages are likely to turn lower from here.  

 

 

In this Point and Figure chart of ANET, below, we can see a longer-term price target of $145 which was projected before ANET's bearish guidance. Interesting how charts work. 

 

 

Bottom line strategy: The top pattern on ANET did not appear overnight. The bearish signs were there for weeks if not months. ANET will be a failing knife so do not attempt to grab it.

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