For investors wanting a systematic way to target growth, joining fundamental momentum with technical timing can be an effective strategy. The process filters for companies showing solid short-term earnings momentum, shown by a High Growth Momentum (HGM) Rating, while also presenting good technical health and a constructive price consolidation pattern, as shown by ChartMill's Technical (TA) and Setup Ratings. This combination seeks to find stocks that are not only expanding quickly but are also in a good position for a possible price increase. One stock that recently appeared from this filter is ACADIA PHARMACEUTICALS INC (NASDAQ:ACAD).
Fundamental Growth Momentum
ACADIA Pharmaceuticals makes a strong case for momentum investors, receiving a ChartMill High Growth Momentum Rating of 6. This number combines several important parts of short-term earnings and sales momentum, which are important for growth-focused strategies like CANSLIM. The rating shows that while the company may not be a perfect "10," it performs well across multiple main growth areas.
A detailed view of the data shows the sources of this rating:
- High Quarterly EPS Growth: The company's latest quarter reported a year-over-year EPS growth of 110%. More notably, analysts forecast growth above 831% for the next quarter, pointing to strong forward earnings momentum.
- Solid Sales Foundation: Revenue growth remains healthy, with the last quarter up 11.3% year-over-year and the trailing twelve-month (TTM) sales growth above 121%.
- Positive Revisions and Surprises: Analyst outlook has become clearly positive, with the average EPS estimate for the next fiscal year increased by over 43% in the past three months. The company has also exceeded EPS estimates in two of the past four quarters by an average of 20.1%.
- Growing Profitability: The sequential rise in profit margin, from 7.77% two quarters ago to 25.76% in the latest quarter, shows better operational efficiency and is a main positive element in the HGM rating system.
While the TTM EPS growth number is negative, mainly because of earlier period comparisons, the strong momentum in recent and forecasted quarters, along with major analyst upgrades, supports the stock's inclusion for momentum investors focused on the future.
Technical Health and Trend
Apart from the fundamentals, a stock's price movement must support the growth narrative. Based on ChartMill's detailed technical report, ACADIA gets a good Technical Rating of 7. This score represents a generally sound chart marked by a positive long-term trend, even as the short-term activity has become neutral.
Main technical positives backing this rating are:
- The stock is trading above its important rising moving averages (50, 100, and 200-day), confirming the main uptrend.
- It shows good relative strength, performing better than 90% of all stocks in the market over the past year and placed in the top group of its biotechnology industry peers.
- The long-term trend is rated as positive, offering a good context for the present setup.
The Setup: A Possible Entry Point
The most important part for timing an entry is the Setup Rating, where ACADIA gets an 8. This high score shows the stock is moving out of a time of consolidation, offering a possible breakout chance. The technical report states that volatility has fallen lately as prices have declined, forming into a clear range.
The analysis finds a defined support area between $26.15 and $26.29, giving a reasonable place for a protective stop-loss order. Just above the present price sits a resistance area from $27.62 to $28.06. A clear move above this resistance could indicate the next upward move in the trend. This organized price action, consolidation near highs with set support and resistance, is exactly what the Setup Rating is made to find, addressing the "when" question for traders.
A Merging Opportunity
ACADIA Pharmaceuticals illustrates the kind of opportunity this joined filtering method aims to find. The company is showing clear, fast growth in earnings and sales, supported by increasing analyst estimates. At the same time, its stock chart displays signs of institutional accumulation, a sound long-term trend with a recent halt that has created a clear technical setup. For investors using momentum and breakout strategies, this meeting of positive fundamental momentum and good technical placement makes ACAD a stock worth further review.
This filter is used each day to find new possible opportunities. You can see the present list of stocks matching these High Growth Momentum and Breakout Setup requirements by visiting this link.
Disclaimer: This article is for informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any security. The data and analysis presented are based on sources believed to be reliable, but their accuracy cannot be guaranteed. Investing involves risk, including the potential loss of principal. Always conduct your own due diligence and consider consulting with a qualified financial advisor before making any investment decisions.
