Yahoo Finance Zacks Investment Ideas feature highlights: Nvidia and Arista Networks
For Immediate Release
Chicago, IL – November 1, 2023 – Today, Zacks Investment Ideas feature highlights Nvidia NVDA and Arista Networks ANET.
Double Bottom: Harness the Power of This Explosive Base
Study the Past to Take Advantage of the Future
"All through time, people have basically acted and reacted the same way in the market as a result of greed, fear, ignorance, and hope. That is why the numerical formations and patterns recur on a constant basis. Over and over, with slight variations. Because markets are driven by humans and human nature never changes." ~ Jesse Livermore
Though legendary investor Jesse Livermore was around a century ago, his advice still holds true to this day and is as fresh as ever. Investors can't predict the future. However, by studying the past, investors can recognize patterns that tend to repeat in the stock market and use them to gain an edge. Like a casino operator, a slight edge played out over a series of trades can lead to big results.
The Double Bottom Pattern: An Explosive Set-Up
In technical analysis, a double-bottom base structure is a bullish chart pattern. The pattern resembles the letter "W" and is characterized by two distinct troughs at approximately the same price level, separated by a peak in between. Traders often look for this pattern because it signifies a period where selling pressure has diminished, and buyers are gradually gaining control of the market. The confirmation of a double-bottom pattern occurs when the stock price breaks above the peak that separates the two troughs.
Nvidia Precedent
A good precedent for investors to study is the double-bottom pattern that occurred in chip leader Nvidia. In February 2016, Nvidia gapped out of a double-bottom base structure after reporting earnings. Over the next year, shares never looked back and gained a mindboggling 400%.
Of course, not all double bottoms are created equally. Below are the main attributes to look for in a double bottom:
Strong Uptrend Prior to Base Structure: Stocks tend to exit bases in the same direction they entered. In other words, make sure the stock is up-trending before it forms the base. Remember, the trend is your friend.
Shakeout: A subtle yet vital clue to look for in a double bottom base is an undercut of the first trough on the second trough. By undercutting the first trough, the stock shakes out the "weak hands."
Gap Up on Massive Volume:A recurring theme in the biggest double-bottom winners is a gap up (often earnings-induced) on heavy volume. Gap-ups indicate that demand has returned to the stock. When NVDA gapped up in our 2016 example, volume exploded to 187% above the 50-day average.
Strong Industry Group: As with any stock, a strong industry group can be a significant tailwind. In 2016, semiconductors were by far the strongest industry group.
Robust Earnings Growth: Ultimately, fundamentals drive stocks. Stocks with the best returns out of double-bottom bases had earnings growth of 40% or more year-over-year.
Arista Networks: Nvidia 2.0?
Tuesday, shares of cloud networking solutions provider Arista Networks gapped out of a double bottom base structure and rose ~13% on volume four times the norm.
Arista checks all the boxes for a potential mega-winner and has a strong uptrend, shakeout below the first trough, and a large gap-up on volume. Arista is part of the hot database industry that benefits from the AI revolution, and earnings are growing at a blistering 46% year-over-year.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks Free >>
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Arista Networks, Inc. (ANET) : Free Stock Analysis Report
