The method of joining Mark Minervini's Trend Template with a High Growth Momentum (HGM) score is made to find stocks that are in strong technical uptrends and have solid fundamental growth traits. This two-step method tries to find companies that lead the market, showing both price momentum and improving business results. By following Minervini's exact technical rules, investors try to start positions during a stock's Stage 2 uptrend, while the HGM score confirms the company is seeing important earnings and sales growth, a key trait of the top performers Minervini has focused on.
Applied Optoelectronics Inc (NASDAQ:AAOI) appears as a strong candidate from this scan, showing a rare match of high technical strength and solid fundamental momentum.
Technical Strength: A Clear Trend Template Candidate
The base of Minervini's Trend Template is a group of strict technical rules made to sort for stocks in a clear, strong uptrend. AAOI now fits these important conditions, which clarifies its complete ChartMill Technical Rating of 10.
- Moving Average Alignment: The stock's price is trading well above its rising 50-day, 150-day, and 200-day simple moving averages (SMAs). Importantly, the shorter-term averages are ordered above the longer-term ones (50-day > 150-day > 200-day), confirming a solid and structured bullish trend across all time periods.
- Proximity to Highs: A main idea of the Minervini method is to focus on strength, not weakness. AAOI's current price is within 25% of its 52-week high of $128.96, showing it is acting as a market leader. At the same time, the price is more than 30% above its 52-week low, having made a large recovery.
- Superior Relative Strength: Maybe most significant is the stock's relative strength (RS) ranking of 99.6. This means AAOI's price performance over the past year has been better than 99.6% of all stocks in the ChartMill universe. Minervini points out that the largest winners usually show high RS early in their advances, as institutional money moves into industry leaders.
This technical view describes a stock in a strong Stage 2 advance, the exact stage where Minervini's SEPA (Specific Entry Point Analysis) method aims to benefit from continued momentum.
Fundamental Momentum: The Driver for High Growth
While the chart shows the "what," the fundamental data explains the "why." The High Growth Momentum score checks a company's earnings and sales path, and AAOI shows the kind of increasing growth that supports lasting rallies.
- High Earnings Revisions: Analyst opinion is a strong catalyst. The average estimate for AAOI's earnings next year has been moved higher by 67.1% over the last three months. This large upward change is a classic Minervini fundamental signal, showing growing belief in the company's short-term profit possibility.
- Solid Quarterly Earnings Growth: The company has shown an ability to regularly beat expectations, with positive earnings surprises in three of the last four quarters. Year-over-year EPS growth for the most recent quarter was 50%, showing maintained operational improvement.
- Strong Revenue Increase: Sales growth is essential for a high-growth story. AAOI's revenue growth has been notable, with year-over-year gains of 33.9%, 82.1%, and 137.9% over the last three reported quarters. This pattern of very high and increasing sales growth is a primary filter for momentum investors looking for companies taking market share.
These fundamental measures provide the reason behind the technical breakout. As Minervini states, "big earnings attract big attention," and the mix of beating estimates, increasing sales, and rising analyst forecasts creates the fundamental setting that can support a continued price rise.
Current Technical Review and Setup
A look at the detailed ChartMill Technical Analysis for AAOI confirms the stock's very good health but also gives a note of care for immediate entry. The report gives AAOI a complete technical rating of 10, noting its positive long and short-term trends and its place as a top-level performer compared to the wider market. The stock is noted to be trading in the upper part of its 52-week range, similar to the S&P 500.
However, the report also gives a lower setup quality rating of 3. This shows that while the stock's trend is perfect, its recent price movement has been unstable, making it difficult to find a low-risk, high-chance entry point with a clear stop-loss. For traders strictly following Minervini's method, this suggests waiting may be needed. The best case would be for the stock to go through a time of consolidation or a volatility contraction pattern (VCP), which would narrow the price range and give a more exact point for a new entry.
Finding Like Opportunities
AAOI shows the kind of security that can be found by methodically using joined technical and fundamental growth filters. For investors looking to build a watchlist of similar high-potential candidates, the scanning process that found AAOI can be repeated.
You can find more stocks that fit this "High Growth Momentum + Trend Template" criteria by using this pre-set screen on ChartMill.
Disclaimer: This article is for information and learning only. It is not a suggestion to buy, sell, or trade any security. The review is based on present data and a specific method, and past results are not a guide for future outcomes. Investing includes risk, including the possible loss of principal. Always do your own research and think about talking with a qualified financial advisor before making any investment choices.