For investors aiming to identify major growth, joining detailed technical study with fundamental momentum can be an effective method. One specific system is promoted by well-known trader Mark Minervini, whose plan depends on finding stocks in strong upward moves, backed by quickening business foundations. The aim is to locate market front-runners near the start of their large price gains. A useful method to use this is by employing filters that combine Minervini’s Trend Template, a group of technical rules for verifying a solid upward move, with selectors for High Growth Momentum (HGM), which highlight firms showing fast and better earnings and sales expansion. This two-part method seeks to separate securities that are both technically healthy and fundamentally set for growth.
Applied Optoelectronics Inc (NASDAQ:AAOI) has lately appeared from this kind of filtering process, offering an example of how a stock can fit both the technical rules of the Minervini system and the pure expansion desired by momentum investors.
A Clear Trend Template Example
Minervini’s Trend Template is made to select for stocks in a clear Stage 2 upward move, skipping poor performers and finding leaders. It requires exact order of moving averages and price behavior to verify strength. An examination of AAOI’s chart and main measures shows it meets each condition:
- Price Above Main Averages: The stock’s last price of $163.47 trades far above its increasing 50-day ($94.63), 150-day ($52.62), and 200-day ($45.71) simple moving averages (SMAs). This order is a main need, showing continued buying interest across all periods.
- Rising Averages: Both the 150-day and 200-day SMAs are in clear upward slopes, with the 200-day average clearly increasing from a past value of $45.02. This verifies the long-term move has become positive.
- Correct Moving Average Order: The nearer-term 50-day SMA is positioned above both the 150-day and 200-day SMAs, and the 150-day SMA is above the 200-day SMA. This “ordered” arrangement is a standard mark of a solid, good upward move.
- Nearness to Highs: At $163.47, AAOI is trading very close to its 52-week high of $163.59, satisfying the rule of being within 25% of its high. More notably, the present price is about 1,278% above its 52-week low of $11.865, well past the 30% least requirement. This shows a powerful recovery and forward motion.
- Better Relative Performance: With a ChartMill Relative Strength (CRS) score of 99.77, AAOI is doing better than almost every other stock in the market. Minervini states that real market front-runners show high relative strength, frequently above 70, as it points to institutional interest and industry leadership.
This technical view is not random. The Trend Template’s goal is to neutrally find strength and resist the urge to “buy declines” in feeble stocks. AAOI’s chart shows a stock that has already made a huge move shift and is now advancing higher with clear support.
The Cause for the Advance: High Growth Momentum
A solid move requires a fundamental cause. The High Growth Momentum score looks for firms where business results are quickening, frequently the reason for a continued price increase. AAOI’s latest financial measures show this quickening plainly:
- Major Sales Expansion: The company’s trailing twelve-month (TTM) sales expansion is at 82.75%. More significantly, recent three-month growth rates display strong forward motion: sales expanded 145.52% three quarters prior, 137.93% two quarters prior, and 82.08% last quarter. While the latest quarter shows a slowdown to 33.91%, the overall path from a low point has been sharp. Analyst belief is also growing, with next-year sales guesses adjusted higher by 22.08% over the past three months.
- Earnings Showing Improvement: After large losses, AAOI is displaying clear gain in profit. The EPS expansion on a TTM basis is 65.85%. The three-month sequence is informative: EPS expanded 93.55% three quarters prior, 42.86% two quarters prior, 57.14% last quarter, and 50.0% in the most recent quarter. The company has exceeded EPS guesses in three of the past four quarters by a typical 6.5%. Also, analysts have grown much more positive about future earnings, increasing next-year EPS guesses by 47.19% in the past three months.
- The Full View for Growth Investors: For expansion-focused investors, these numbers are key. They indicate a firm possibly at a turning point, changing from reorganization or recovery into a time of fast growth and growing profit. This fundamental “narrative” is what can maintain a technical breakout and change it from a short-term transaction into a longer-term growth investment. The Minervini plan directly connects such fundamental quickening with technical breakouts, suggesting that the largest price advances are driven by better business conditions.
Technical Condition and Present Position
Based on ChartMill’s own study, AAOI’s technical condition is strong, receiving a top Technical Rating of 10 out of 10. The report states the stock is in positive long-term and short-term moves, is a leading performer compared to both the wider market and its Communications Equipment sector, and is trading close to new 52-week highs. The large average trading volume improves the good liquidity picture.
However, the study also gives a key warning related to entry timing. The stock’s Setup Quality Rating is a poor 3, showing that while the move is very good, the recent price activity has been highly changeable. The stock has moved in a broad range ($78.58 - $163.59) over the past month and is presently at the top part of that range. The summary notes that “it does not offer a good entry chance at this time” and proposes waiting for a time of settling or a decline to find a lesser-risk entry point with a more defined level for a protective stop-loss. This difference is important—it separates finding a solid stock from finding a low-risk time to purchase it.
For a complete look at the support, resistance, and other technical parts, you can see the full ChartMill Technical Report for AAOI.
Summary
Applied Optoelectronics Inc shows the kind of security looked for by a joined Minervini and High Growth Momentum filter. Its chart shows the clear order of a leading upward move as described by the Trend Template, while its fundamentals show a firm seeing a major rise in sales and a recovery in earnings—exactly the type of quickening that expansion-focused investors want. The plan’s central idea is that such fundamental reasons, when verified by technical strength, can result in large gains.
It is key to note that the present technical study proposes waiting for new entries. The large advance has left the stock stretched in the near term, showing the value of the Minervini plan’s following actions: waiting for a defined, low-risk entry point like a volatility decrease pattern (VCP) or a helpful decline to a main moving average before investing money.
Want to find other stocks that fit this mix of solid moves and high expansion? You can look at the filtering rules that found AAOI and see present outcomes using this High Growth Momentum + Trend Template filter on ChartMill.
Disclaimer: This article is for information and learning only. It is not advice to purchase, sell, or keep any security. The study uses given data and certain filtering systems. Investors must do their own complete research, think about their personal risk comfort, and talk with a registered financial consultant before making any investment choices. Past results do not guarantee future outcomes.