The last time I looked at the charts of Arista Networks ( ANET) was back on July 12, when I wrote, " Traders could probe the long side of ANET in the $100-$95 area risking below $90. The $120 area is our price target." With the stock now above that price target, let's again check out the charts of the developer of cloud networking technology.
In this daily bar chart of ANET, below, we can see that traders who took our buy recommendation were able to snag some nice profits by early August when ANET reached our $120 price target. Prices retreated into October and have rallied to a new high for the move up in early December. ANET is pulling back as the end of year approaches but is still above the rising 50-day moving average line and above the slower-to-react 200-day moving average line.
Trading volume increased in late October and early November as prices rallied. The volume decreased as prices continued up into early December and that is a problem. The daily On-Balance-Volume (OBV) line has moved up and down with the price action the past year and is weakening now. The Moving Average Convergence Divergence (MACD) oscillator has crossed to the downside for a take profit sell signal.
In this weekly Japanese candlestick chart of ANET, below, we can see the price action of the past three years. ANET is in a longer-term upward trend as it trades above the 40-week moving average line. A longer-term sideways trend has been operating for more than a year. The weekly OBV line has matched the sideways price action. The MACD oscillator is above the zero line but has begun to narrow, indicating some loss of trend strength.
In this daily Point and Figure chart of ANET, below, we can see a downside price target in the $109 area.
In this weekly Point and Figure chart of ANET, below, we can see a bullish price target in the $201 area.
Bottom line strategy: The charts above suggest some big upside potential, but the key to trading success will be a well-timed purchase. In the short run prices are likely to retreat. Let's keep our powder dry and see how prices behave around the 200-day moving average line. Maybe this will be a buying opportunity, but we need to wait and see.
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