In the search for stocks with high growth potential, many investors use systematic methods that join strict technical study with fundamental momentum. One method is supported by well-known trader Mark Minervini. His plan centers on locating stocks already in strong upward moves and supported by improving business results. This method is not for locating inexpensive stocks, but for locating the correct stocks at the correct time, those showing better relative strength, healthy price formations, and strong earnings and sales growth. By using a fixed group of filters, investors can search for securities that fit these two needs of technical soundness and fundamental momentum, trying to take part in the beginning phases of a stock's biggest gains.
Confluent Inc. - Class A (NASDAQ:CFLT) appears as a candidate that deserves more study through this view. The company, which offers a data streaming platform based on Apache Kafka, works directly in the high-growth software infrastructure sector. A recent search made to find stocks matching the Minervini Trend Template while also having a High Growth Momentum (HGM) score has brought attention to CFLT. This pairing indicates the stock may now show the joining of a firm technical path with improving business speed that growth-focused plans look for.
Reviewing the Technical Base: The Minervini Trend Template
The center of Minervini's stock selection method is his Trend Template, a group of fixed technical rules made to search for stocks in clear, lasting uptrends. The template stresses trading in the direction of the main trend by making sure a stock's price movement and moving averages are arranged positively across several time periods. For Confluent, a check of the main measures shows it now meets these important technical requirements:
- Price Above Main Moving Averages: CFLT's last price of $30.99 trades above its rising 50-day ($30.56), 150-day ($25.19), and 200-day ($24.81) simple moving averages (SMAs). This arrangement is a basic part of the Trend Template, showing the stock is in a clear stage 2 uptrend.
- Moving Average Arrangement: 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 stacking of averages confirms the uptrend's force and the existence of continued buying interest across short, medium, and long-term periods.
- Nearness to Highs: A main idea of Minervini's view is to concentrate on strength, not weakness. CFLT's price is within 0.03% of its 52-week high of $31.00 and is about 98% above its 52-week low of $15.64. This shows notable momentum and places the stock as a market frontrunner instead of a straggler making up ground.
- Better Relative Strength: With a ChartMill Relative Strength (CRS) score of 74.38, CFLT does better than almost three-fourths of all stocks in the database. More significantly, inside its competitive software industry, it does better than 86% of its 278 similar companies. High relative strength is a sign of market frontrunners and is an important filter in the Trend Template to make sure one is investing in the strongest performers.
This technical setup is important because it methodically takes out stocks in resting or falling stages, making the investor focus only on issues where the easiest path is clearly upward. It is a rule that avoids the lure to "buy the drop" in a damaged stock and instead tries to "buy the rise" in a proven success.
Examining the Growth Driver: High Growth Momentum Measures
While a firm chart is necessary, Minervini's plan gives equal weight to the fundamental cause, the earnings and sales growth that finally drive a stock's rise. The High Growth Momentum score tries to measure this speed increase. For Confluent, several fundamental measures show the possible growth path:
- Earnings Growth Speed Increase: The company has shown a trend of firm and speeding year-over-year EPS growth in recent quarters, with numbers of 60.0%, 50.0%, 30.0%, and 33.3% from Q-3 to the latest quarter. This trend of high growth is a good sign, though the recent slowing needs watching for new speed increase.
- Steady Earnings Surprises: CFLT has exceeded analyst EPS predictions in each of the last four quarters, with an average surprise of 18.15%. Steady positive surprises often lead to higher changes in future predictions and more institutional interest.
- Firm Sales Increase: Top-line growth stays healthy, with recent quarterly year-over-year sales growth between 19.3% and 24.8%. The latest quarter showed 20.5% growth, and future predictions point to a continuation near the 20% level. Revenue growth in the last reported full year was 21.1%.
- Positive Estimate Changes: Analyst opinion is positive, with the average EPS prediction for the next fiscal year changed upward by 3.29% over the last three months. Upward changes are a main part of growth momentum, showing growing belief in the company's future earnings.
These fundamental points are important because they give the "reason" behind the stock's technical force. A strong uptrend is much more likely to continue if it is backed by growing profits and market position, rather than just speculation. The pairing indicates institutional investors may be gathering shares based on this getting better fundamental view.
Technical Report Summary and Risk Points
ChartMill's own technical report for CFLT gives a firm score of 7 out of 10, stating that both its short-term and long-term trends are positive, a good sign. The report confirms the stock is reaching new 52-week highs, ahead of the wider market. However, it also states a setup quality rating of only 2, showing that after its recent climb, the stock may be stretched in the short term and is not now giving a standard low-risk pause or rise pattern. The report finds close support near the $30 level, matching with main moving averages, and resistance at the recent high of $31.00.
This technical summary shows a real part of the plan: while a stock may meet all search rules, entry timing is key. The current stretched condition indicates investors might gain from waiting for a time of reduced price movement or a retreat to a logical support zone before starting a position, allowing for a better risk/reward setup.
Locating Comparable Chances
Confluent shows the kind of candidate that comes from a ruled search process combining Minervini's trend ideas with growth momentum filters. For investors looking to study comparable chances, the preset search that found CFLT is ready to use. You can locate more possible candidates by using the ‘High Growth Momentum + Trend Template’ search here.
Disclaimer: This article is for information and learning only. It is not advice to buy or sell any security. The study is based on given data and certain search methods. Investors should do their own full research, think about their personal risk comfort, and talk with a qualified financial advisor before making any investment choices. Past results do not show future outcomes.