In the world of growth investing, combining a solid technical framework with firm fundamental momentum can be an effective approach for finding possible leaders. One systematic method for this comes from the work of trader Mark Minervini, whose strategy depends on the "Trend Template" for technical selection and a focus on speeding fundamental growth. This method tries to find stocks that are not only in strong, confirmed uptrends, signaling institutional support and market leadership, but are also supported by companies showing outstanding and getting better financial performance. The aim is to find securities where price strength and business momentum come together, providing a disciplined way to see opportunities before they become widely known.
CONFLENT INC-CLASS A (NASDAQ:CFLT) recently appeared through a screening process made to use this exact idea. The screen first uses Minervini's Trend Template to filter for technically better charts, then adds a "High Growth Momentum" rating to make sure the basic business fundamentals support the price action. A detailed examination of Confluent shows why it passed this multi-factor test.
Meeting the Minervini Trend Template
Mark Minervini's Trend Template is a fixed set of technical rules made to filter for stocks in a leading Stage 2 uptrend. It stresses agreement across multiple timeframes and nearness to new highs, making sure an investor is buying strength, not weakness. Confluent's chart now shows a classic agreement with these rules:
- Price Above Key Moving Averages: The stock is trading well above its rising 50-day ($30.43), 150-day ($24.50), and 200-day ($24.42) simple moving averages (SMAs). This ordered agreement points to continued buying pressure across short, intermediate, and long-term periods.
- Moving Average Agreement: The 50-day SMA is above both the 150-day and 200-day SMAs, while the 150-day SMA is above the 200-day SMA. This ordered positive agreement confirms the trend's force and speed.
- Nearness to Highs: At a price of $30.75, CFLT is trading within 0.1% of its 52-week high of $30.77. Minervini's template needs a stock to be within 25% of its high, as leading stocks often make new highs. Confluent is not just close to its high, it is testing it.
- Distance from Lows: The current price is about 97% above its 52-week low of $15.64, well beyond the template's minimum need of being 30% above the low. This shows a strong recovery and trend change.
- Better Relative Strength: With a ChartMill Relative Strength (CRS) rating of 83.35, CFLT is doing better than about 83% of the whole market. High relative strength is a key part of the Minervini method, finding sector leaders that draw institutional money.
This technical view is especially significant given the wider market situation. While the S&P 500's long-term trend is negative, CFLT is creating its own path higher, a sign of unusual individual strength that Minervini often searches for in his "bottom-up" stock selection process.
Qualifying as a High-Growth Business
A strong chart is only part of the story. The Minervini strategy fully includes fundamental study, looking for companies with speeding earnings and sales growth, the fuel that can maintain a strong trend. Confluent, a platform for data in motion built around Apache Kafka, shows notable growth measures:
- Earnings Momentum: The company has regularly beaten analyst predictions, exceeding EPS estimates in each of the last four quarters by an average of over 18%. More significantly, it shows speeding year-over-year EPS growth in recent quarters (50%, 60%, 30%, and 33%).
- Firm Sales Growth: Revenue growth stays strong and steady, with the last four quarters showing year-over-year gains of 24.8%, 20.1%, 19.3%, and 20.5%. This shows a steady, high-teen growth path that analysts see continuing, with higher changes to next-year revenue estimates over the past three months.
- Growing Profitability: After major investment, the company is moving toward profitability. Its trailing twelve-month (TTM) non-GAAP EPS is positive at $0.42, showing 40% growth over the prior TTM period. Also, free cash flow per share has jumped by over 300% in the past year, a key sign of getting better financial health and operational efficiency for a growth company.
These fundamental traits, consistent earnings beats, strong and stable revenue growth, and a clear path to growing profitability, are exactly what the "High Growth Momentum" filter tries to find. They provide the fundamental catalyst that supports the technical breakout, agreeing with Minervini's SEPA (Specific Entry Point Analysis) idea, which needs a mix of trend, fundamentals, and a catalyst.
Technical Health and Setup Summary
Beyond the Trend Template list, Confluent's overall technical health is firm. According to ChartMill's own analysis, CFLT gets a high Technical Rating of 9 out of 10, reflecting its strong positive trends across all timeframes and its leading position within the software industry. The analysis notes the stock is making a new 52-week high while the wider market is not, a sign of clear relative strength.
The report also gives a Setup Rating of 7, showing the stock is coming out of a time of consolidation with lower volatility. It finds immediate resistance just above the current price at $30.76 and support near $30.68. This narrow trading range suggests the stock may be set for a possible move, giving a defined area for risk management. You can see the full, detailed technical analysis for Confluent here.
A Candidate for Further Research
Confluent presents a case where a strict, rules-based screening process finds a security that agrees with a disciplined growth and momentum strategy. It displays the signs Minervini links with leading stocks: a strong price trend confirmed by multiple moving averages, better relative strength, and nearness to new highs, all supported by speeding fundamental growth in earnings and sales.
Interested in finding other stocks that meet this mix of strong technical trends and high-growth fundamentals? You can examine the screening method that found Confluent and see current results by going to the High Growth Momentum + Trend Template screen on ChartMill.
Disclaimer: This article is for informational and educational purposes only. It is not a recommendation to buy or sell any security. The analysis is based on historical data and predefined screening criteria, which are not guarantees of future performance. Always conduct your own thorough research, consider your individual financial situation and risk tolerance, and consult with a qualified financial advisor before making any investment decisions.