Arista Networks Plunges 8.9% As Technical Indicators Flash Bearish Signals

Arista Networks (ANET) concluded the most recent session with a significant decline of 8.92%, closing at $139.39 after trading between $139.02 and $149.47 on high volume exceeding its recent average. This substantial downward move necessitates a thorough technical assessment of the stock's trajectory.
Candlestick Theory
Recent price action reveals significant bearish signals. The pronounced 8.92% down candle on September 12th, characterized by a large real body closing near its low after failing to sustain gains above $149, suggests strong selling pressure and potential exhaustion of the prior uptrend. Key resistance is now firmly established near $153-$156 (recent highs on Sept 11th). Critical near-term support lies around the $135-$137 zone, evidenced by multiple closes and intraday reactions throughout August and early September. A decisive break below this support could signal further downside momentum, while holding may indicate consolidation.
Moving Average Theory
The moving average configuration signals near-term trend deterioration beneath longer-term support. The 50-day Moving Average (calculated dynamically near ~$131) recently provided support during August pullbacks but was violated decisively on September 12th. More critically, the stock closed below its 100-day (~$124) and 200-day (~$107) moving averages on this large down day. While these longer-term averages are still ascending, the breach indicates significant weakening of the intermediate-term uptrend. Regaining the 50-day MA is now a key hurdle for bulls. The current positioning, below all three key averages, suggests bearish control in the immediate term.
MACD & KDJ Indicators
Momentum oscillators align in signaling negative momentum. The MACD (12,26,9) likely generated a bearish crossover recently as price declined sharply from the $156 peak, moving into negative territory and confirming the loss of positive momentum. The KDJ indicator (commonly 9,3,3) reflects this bearish shift; the K and D lines were likely overbought near the $156 peak before turning down sharply. The J line likely plunged well below the 50 level, entering oversold territory after the large drop but suggesting the potential for oversold conditions to be sustained or deepen before a rebound signal emerges. Both indicators support the bearish momentum shift signaled by the price action and volume.
Bollinger Bands
Volatility expanded significantly during the recent decline. The sharp price drop on September 12th pushed the price below the lower Bollinger Band (typically set at 20-period SMA, 2 standard deviations). A close below the lower band often signals an oversold condition, but it can also indicate the start of a strong downtrend, especially on high volume. The bandwidth (distance between upper and lower bands) had been narrowing slightly before this event, suggesting reduced volatility, which was dramatically reversed. Such a forceful break lower implies powerful selling pressure, increasing near-term downside risks until price stabilizes back within the bands.
Volume-Price Relationship
Volume patterns validate the bearish reversal. Trading volume surged dramatically on August 6th (over 25.9 million shares), coinciding with a major 17.49% upward gap and breakout. This represents a high-volume accumulation or event-driven surge. However, volume expanded again significantly on the sharp decline of September 12th (17.87 million shares), indicating aggressive distribution and conviction behind the sell-off. This high-volume decline following the earlier high-volume breakout creates a classic "distribution near highs" signal, enhancing the credibility of the bearish reversal and suggesting the selling pressure may not be exhausted.
Relative Strength Index (RSI)
The RSI (14-period) dynamics confirm waning momentum leading into the drop. Following the surge on August 6th, the RSI would have entered overbought territory (>70), reflecting that strong move. As price subsequently struggled to make significant new highs near $156 despite generally higher lows in September, the RSI likely formed a bearish divergence – it peaked near overbought levels in mid-August and was forming lower highs into early September while price tested its high. The plunge on September 12th would have driven the RSI sharply lower, likely down towards or below 40-35, exiting overbought territory and confirming the momentum loss signaled by divergence. It has not yet reached deeply oversold (<30) levels, suggesting potential for further downside before stabilization.
Fibonacci Retracement
Applying Fibonacci levels to the major swing low of April 3rd ($64.37) and the high of September 11th ($156.32) provides key retracement targets. The initial critical support level is the 23.6% retracement near $140.90, which was breached decisively on the close below $140. The next key Fibonacci level is the 38.2% retracement near $122.60. Given the sharpness and volume of the recent decline, a test down towards the 50% retracement level ($110.35) or even the 61.8% level ($98.10) appears increasingly plausible, especially if the $135-$137 support cluster fails. Confluence exists around the $122-$125 zone, combining the 38.2% Fib and the upward-sloping 100-day moving average (~$124).
In conclusion, Arista Networks exhibits multiple concerning technical signals following its recent sharp sell-off. Bearish candlestick confirmation, breakdowns below key moving averages, negative MACD/KDJ crossovers, a high-volume break below Bollinger Bands, validated bearish volume divergence, RSI confirmation of lost momentum, and vulnerability below key Fibonacci levels collectively suggest significant technical deterioration. While short-term oversold conditions might spark a consolidation or minor rebound, the confluence of these indicators points to a high probability of continued downward pressure and potentially deeper retracements in the near to intermediate term, barring a swift recovery above the critical $153-$156 resistance zone and recent moving averages. The breach of the $135-$137 support cluster would further confirm bearish control and increase the risk of a move towards the $122-$125 zone.