Five Below (NASDAQ:FIVE) Fits Minervini Trend Template with Strong Growth Momentum

The process of identifying stocks with the potential for large gains often involves combining strict technical analysis with a focus on fundamental momentum. One organized approach to this is the strategy made popular by trader Mark Minervini, which uses a specific Trend Template to find equities in clear, strong uptrends. This method is then often paired with searches for high-growth momentum, looking for companies showing accelerating earnings and sales. The goal is to find securities where powerful price action is backed by improving business fundamentals, creating a combination of factors that can come before major price increases.

Five Below Inc (NASDAQ:FIVE) appears as a present candidate that fits this combined approach, satisfying the strict technical conditions of the Minervini Trend Template while also showing features appealing to investors focused on growth.

Technical Fit with the Minervini Trend Template

The Minervini Trend Template is made to filter for stocks in a clear Stage 2 uptrend, avoiding those in consolidation or falling phases. It focuses on price strength, the order of key moving averages, and better performance compared to the market. A check of Five Below’s chart and technical data shows it meets these main conditions:

• Price Above Key Moving Averages: The stock’s present price trades well above its rising 50-day, 150-day, and 200-day simple moving averages (SMAs). This ordered position shows sustained buying pressure across short, intermediate, and long-term periods.
• Positive Moving Average Directions: Importantly, the 150-day and 200-day SMAs are both in confirmed upward directions. The 200-day SMA, a standard for the long-term direction, has been rising steadily, a strict condition in the Minervini framework that verifies the stock is in a bull market phase.
• Nearness to Highs: Five Below is trading within 3% of its 52-week high, well beyond the template’s condition of being within 25%. This nearness to new highs is a sign of market leadership, indicating the stock is being accumulated rather than sold.
• Strong Performance Compared to Market: With a ChartMill Relative Strength (CRS) score of 92.59, the stock performs better than over 92% of the market. High relative strength is a key part of the strategy, as top stocks often continue to lead, particularly during positive market phases.

This technical view supports a main belief of the Minervini method: trade in the direction of the clear trend. By filtering for stocks already in strong uptrends, the strategy aims to join momentum that is probable to persist, instead of trying to guess a bottom or turn.

Fundamental Momentum for Growth Investors

While the Trend Template deals with the "when," growth searches deal with the "why." The High Growth Momentum (HGM) rating looks for speeding up business performance, which often serves as the reason for continued price gains. Five Below’s recent fundamental data shows several positive momentum signs:

• Strong Recent Earnings Growth: The company has reported notable year-over-year earnings per share (EPS) growth in recent quarters, including a 50% rise in the last reported quarter. This speed-up from earlier periods points to a possible change in profitability.
• Steady Earnings Surprises: Five Below has exceeded analyst EPS estimates in each of the last four quarters, with an average surprise of almost 45%. This steady overperformance can lead to positive earnings estimate changes and more institutional attention.
• Healthy Sales Growth: Revenue growth remains solid, with the last quarter showing a 23.7% year-over-year increase. Top-line growth is necessary for confirming a company’s expansion story and increasing profitability.
• Positive Analyst Estimate Changes: Analysts have been increasing their estimates, with the average EPS forecast for the next fiscal year rising by nearly 9% over the past three months. Upward estimate changes are an important momentum filter, as they show growing belief in the company’s future.

These fundamental parts fit with the growth-focused side of a combined strategy. The Minervini approach states that the largest stock winners are usually backed by strong, and often speeding up, earnings and sales growth. This fundamental strength supplies the "fuel" that can maintain a technical breakout and push a stock upward.

Technical Condition and Present Pattern

Beyond the specific Trend Template conditions, a wider technical analysis of Five Below shows a stock in sound condition but one that may need waiting for a better entry point. According to the detailed ChartMill Technical Report, the stock receives a complete technical rating of 10/10. This score shows outstanding strength across multiple periods, better performance compared to both the wider market and its specialty retail group, and all key moving averages pointing upward.

The report states, however, that the pattern quality rating is presently medium. This means that while the long-term direction is perfect, the stock has seen strong recent price movement and may be stretched in the short term. The analysis proposes that waiting for a time of consolidation or a move back toward known support levels (found in the $150-$155 and $145-$147 areas) could give a more advantageous risk/reward entry point fitting with careful trade management.

Locating Comparable Opportunities

Five Below acts as a real example of how joining trend-following technical rules with growth momentum filters can find possible leaders. For investors looking to search for other securities that meet this two-part condition, the preset screen is ready for more study.

You can view the present list of stocks passing this "High Growth Momentum + Trend Template" screen by clicking here.

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Disclaimer: This article is for informational and educational purposes only. It is not intended as investment advice, a recommendation, or an offer to buy or sell any security. The analysis is based on data provided and certain methods, but past performance is not a guide to future results. Investors should do their own research and talk with a qualified financial advisor before making any investment decisions. Please read our full disclaimer here.