Investors looking to find high-potential stocks often use systematic methods that join strong technical patterns with solid fundamental growth. One method is supported by well-known trader Mark Minervini, whose plan depends on his specific Trend Template and a concentration on companies showing speeding business momentum. This two-part method tries to catch stocks already in strong upward moves, supported by fundamental gains that can support continued price gains. By sorting for stocks that fit these strict technical rules while also rating well on measures of earnings and sales momentum, the plan tries to find leaders set for more strong performance.
ALLEGRO MICROSYSTEMS INC (NASDAQ:ALGM) stands as a present candidate that seems to fit this strict investment structure. The semiconductor company, which creates sensor and power integrated circuits for automotive and industrial markets, is displaying the signs of both technical health and fundamental speeding that the plan values.
Fitting the Minervini Trend Template
The center of Minervini's technical screening is the Trend Template, a group of fixed rules made to guarantee a stock is in a verified, long-term upward move. Allegro MicroSystems presently meets these important technical states:
- Price Above Important Moving Averages: The stock's last price of $41.99 trades well above its rising 50-day ($30.76), 150-day ($30.49), and 200-day ($29.63) simple moving averages (SMAs). This order points to maintained buying pressure across all main timeframes.
- Positive Moving Average Order: The 50-day SMA is above both the 150-day and 200-day SMAs, while the 150-day SMA is also above the 200-day SMA. This step-by-step positive stacking of averages verifies a healthy and arranged upward move.
- Nearness to Highs: At $41.99, the stock is trading within 0.3% of its 52-week high of $42.11, meeting the template's need to be within 25% of the high. At the same time, it sits about 156% above its 52-week low of $16.38, well passing the 30% lowest limit. This shows strong recovery momentum and a tendency to guide the market.
- Better Relative Strength: With a ChartMill Relative Strength (CRS) score of 94.48, ALGM is doing better than almost 95% of all stocks. High relative strength is a key part of the Minervini method, as it finds market leaders that often keep leading.
This technical view is not by chance; it mirrors the basic fundamental story that is pulling institutional money. The Trend Template works as a filter to divide true market leaders from weaker companies, making sure an investor's attention is on health rather than looking for deals in slower areas.
Meeting High Growth Momentum
Beyond a clean chart, the Minervini plan greatly values fundamental speeding. The "High Growth Momentum" (HGM) rating judges a company's recent path in earnings and sales. Allegro MicroSystems shows several strong data points that lead to a healthy HGM profile:
- Strong Recent Earnings Growth: The company's newest quarterly earnings per share (EPS) jumped 114.3% compared to the same quarter last year. This comes after earlier quarter growth of 62.5% and 200% in the two quarters before that, pointing to a powerful and speeding earnings pattern.
- Healthy Sales Speeding: Revenue growth has also sped up again clearly, with the last quarter showing year-over-year growth of 28.9%. This is a major gain from the 14.4% growth in the earlier quarter and a clear change from a drop earlier in the year.
- Steady Earnings Surprises: The company has passed analyst EPS guesses in each of the last four quarters, with an average pass of 7.15%. This habit of beating guesses often pushes positive changes and fresh investor interest.
- Upward Guess Changes: Analysts have been lifting their forecasts, with the average EPS guess for the next year growing by 2.02% over the last three months. Rising guesses are a main force for more price momentum, as they show growing belief in the company's future outlook.
For a growth-centered plan, these measures are key. They go past still valuation and instead highlight where business performance is getting better most quickly. This fundamental momentum often comes before and feeds the strong price patterns that the Trend Template is made to find.
Technical Condition and Present Position
A look at Allegro's separate technical report gives more detail. The stock gets a nearly perfect Technical Rating of 9 out of 10, reflecting its healthy positive patterns across short and long-term timeframes. The report states the stock is making new 52-week highs on growing volume, a standard sign of institutional buying.
However, the report also gives a note of care for tactical entry. While the technical condition is very good, the present Setup Quality Rating is a low 3. This means that after a sharp recent climb—the stock is up over 34% in the past month—the price action has become unsteady and stretched in the short term. The study proposes that while the long-term pattern is strong, the risk/reward for a new entry could be better after a time of settling or a move back to a set support level, like the noted trendline near $36.31.
A full breakdown of the technical view, including support levels and momentum indicators, is found in the full Allegro MicroSystems technical report.
Conclusion
Allegro MicroSystems gives a case study in fitting with a strict growth and momentum plan. It meets the strict technical list of the Minervini Trend Template, confirming its place as a market leader in a healthy upward move. Fundamentally, it shows the high-growth momentum valued by the plan, with quickly speeding earnings and sales, steady positive surprises, and lifting analyst guesses. While the strong short-term move suggests waiting for a better entry position may be wise, the combination of technical and fundamental health makes ALGM a stock worth watching for investors following this method.
For investors wanting to find other stocks that presently meet this mix of high-growth momentum and healthy technical patterns, more study can be done using the dedicated screening tool.
Disclaimer: This article is for information and learning only. It is not meant as investment advice, nor does it form a suggestion to buy, sell, or hold any security. The study is based on given data and certain methods, but past performance is not a sign of future results. Investors should do their own study and talk with a qualified financial advisor before making any investment choices.
