Investors aiming to find stocks with high potential often search for a mix of solid technical patterns and strong fundamental growth. One organized method that merges these parts is the strategy made famous by trader Mark Minervini. His approach depends on the "Trend Template," a group of technical rules meant to find stocks in forceful, confirmed uptrends. This is then combined with an emphasis on fundamental improvement, specifically, companies showing major and often speeding growth in earnings and sales. A stock that passes both the strict technical list and shows high-growth fundamentals presents an interesting profile for momentum and growth-focused investors.
DRDGOLD LTD-SPONSORED ADR (NYSE:DRD) has recently appeared on scans that mix Minervini's Trend Template with high-growth momentum filters. This mix indicates the stock deserves more attention from investors using such a structured, growth-focused method.
Reviewing the Technical Trend
The main part of the Minervini strategy is the Trend Template, which confirms a stock is in a clear, long-term uptrend before review. The template uses moving averages and price action compared to yearly highs and lows to scan for strength and momentum.
A look at DRD's chart shows it currently passes the main technical rules:
- Price vs. Moving Averages: The stock is trading above its rising 50-day, 150-day, and 200-day simple moving averages (SMAs). This order shows continued buying pressure across short, intermediate, and long-term periods.
- Moving Average Order: The 50-day SMA ($33.04) is above both the 150-day SMA ($25.99) and the 200-day SMA ($23.08), while the 150-day SMA is also above the 200-day SMA. This layered, upward-sloping pattern is a standard sign of a strong Stage 2 advance.
- Nearness to Highs: At its recent price near $35.65, DRD is trading well above the Minervini limit of being at least 30% above its 52-week low of $10.17. At the same time, it is within 25% of its 52-week high of $39.37, showing it is acting like a market leader set for possible breakouts rather than a laggard in recovery.
- Relative Strength: With a ChartMill Relative Strength (CRS) score of 98.34, DRD is doing better than almost all other stocks in the market over the past year. Minervini stresses that the largest winners usually show better relative strength early in their advances.
This technical view is important because it shifts the focus away from "low-priced" stocks at lows and toward "strong" stocks showing institutional buying and momentum. It gives a numerical structure to trade in the direction of the main trend.
Reviewing High-Growth Fundamentals
While the Trend Template handles the "when" to buy, the "what" to buy is decided by fundamental growth. The High Growth Momentum (HGM) rating looks for companies with speeding financial results, a feature common among stocks before they make large moves. DRD's recent financial numbers show several high-growth features:
- Large Earnings Growth: The company's trailing twelve-month (TTM) EPS has grown by about 69% year-over-year. Even more interesting is the recent quarterly speed, with the last reported quarter showing EPS growth of nearly 72% compared to the same quarter last year.
- Strong Revenue Growth: Top-line growth is also solid, with TTM revenue up over 26%. The most recent quarter saw sales growth of nearly 25%, showing continued demand.
- Getting Better Profitability: The company's profit margin in the last reported quarter was about 31.2%, a major increase from levels reported in earlier periods. Increasing margins on growing sales is a forceful mix that often draws institutional investment.
- Positive Analyst Changes: The average analyst estimate for next year's EPS has been moved upward by over 24% in the last three months. Such upward changes are a main catalyst, as they show growing confidence in the company's future earnings ability and can lead to more buying.
For growth investors, these numbers are not just about past performance; they signal a company that is gaining business speed. This fundamental speed, when matched with a solid technical trend, creates the possibility for what Minervini calls "superperformance."
Technical Report Summary
A full technical analysis report on DRD matches the screening results. The report gives the stock a high technical rating of 9 out of 10, noting its solid long-term positive trend and exceptional yearly performance, where it did better than 98% of all stocks. The setup rating is a fair 6, showing the stock has been moving within a range over the past month, which can come before a new directional move. The report finds clear support areas below the current price and notes very little overhead resistance, which can be positive for a possible breakout.
For a full breakdown of the support levels, trend analysis, and a detailed trade setup example, you can see the full ChartMill Technical Report for DRD.
Locating Similar Possibilities
DRD shows the kind of security that can be found by methodically using combined technical and fundamental filters. Investors looking to scan for other stocks that pass similar rules of solid trend following and high-growth momentum can examine the preset screen. You can find more possible candidates by using this 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 current data and a specific investment methodology. All investing involves risk, including the potential loss of principal. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.
