When in doubt, zoom out.
As a trader, it’s easy to get caught up in the market’s daily moves.
That’s where the action is.
But I often discover my best trading opportunities when I “zoom out”... and focus on a stock’s weekly and monthly charts.
This removes a lot of the noise. And it’ll help you see the trend more clearly.
That leads me to the latest Trade of the Week: Arista Networks (ANET).
ANET is a $48 billion computer hardware company. Specifically, it makes products for data centers.
In other words, it’s a direct beneficiary of cloud computing—one of today’s most durable, long-term megatrends.
ANET looks excellent when you zoom out.
Below is ANET’s two-year weekly chart. ANET recently broke out of a huge base that it spent all of 2022 building.
Since that initial breakout, ANET has spent the past months tightening up.
Source: StockCharts
As I’ve explained before, a stock’s chart will often do this before making a big move.
And all signs point to ANET’s next move being higher.
The trend is even clearer when we look at ANET’s monthly chart.
ANET recently broke out of a base that it built between 2018 and 2021.
This indicates ANET is still very much in the early stages of a long-term bull market.
Source: StockCharts
I suggest buying ANET at current market prices, and I’m targeting $225/share over the next 12 to 18 months. That’d be about a 42% move higher from today’s prices.
Exit your position if ANET closes below $140. That gives us a risk-reward ratio of more than 3:1 on this trade.
Action to take: Buy ANET at current market prices.
Risk management: Exit your position if ANET closes below $140.
Justin Spittler
Chief Trader, RiskHedge
