The Nasdaq Composite is facing challenges, recently dipping 10% from its recent high and falling below its 200-day moving average, a critical support level. This marks the end of a 333-day streak without such a drop, raising concerns about its long-term momentum. Typically, this break suggests a tough period ahead, with historical trends showing an average decline of 0.5% a year later. Despite a mild relief in stock futures, the Nasdaq is down 3% this week, affected by rising trade tensions and tariffs. Meanwhile, UBS upgraded Arista Networks, predicting significant revenue growth ahead.
The outlook for the Nasdaq Composite is not optimistic at the moment. On Tuesday, this tech-focused index hovered close to correction territory, remaining down 10% from a recent peak throughout much of the volatile trading session. Additionally, the Nasdaq fell below its 200-day moving average, a crucial level that traders monitor closely. When an asset dips below this key support level, it raises red flags about its long-term momentum. According to Bespoke Investment Group, the Nasdaq had managed to avoid a close below its 200-day moving average for 333 trading days until this week, marking the seventh-longest streak of above-average closes in its history. Typically, breaking below this threshold after such a prolonged period signals challenging times ahead, as noted by Bespoke. The firm indicated that the Nasdaq tends to see an average decline of 0.5% one year after first closing below its 200-day moving average in a year. Meanwhile, over a six-month timeframe, the index typically reflects only a modest 1.27% increase and maintains positive trading just 60% of the time. On Wednesday morning, stock futures indicated a slight reprieve from the recent downturn, though significant efforts are needed for the Nasdaq to recover its prior losses. Thus far in the week, the Nasdaq has dropped 3%, with chipmaker Nvidia suffering a loss greater than 7%, amid escalating trade tensions. On Tuesday, the U.S. imposed a 25% tariff on imports from Mexico and Canada, alongside an additional 10% tariff on Chinese goods. In other news on Wednesday, UBS raised its rating for Arista Networks from neutral to buy, projecting more than 34% upside. Analyst David Vogt noted, “An acceleration in key Arista metrics such as ‘purchase commitments’, ‘deferred revenue’, and ‘finished goods inventory’ last quarter supports revenue recognition that the company’s CY25 revenue guidance of 17% is overly conservative compared to our 19% forecast and analysis suggesting growth could reach up to 25%.”
