Lumentum Holdings Inc (NASDAQ:LITE) Presents a High Growth Momentum and Technical Breakout Case

Lumentum Holdings Inc (NASDAQ:LITE) offers a noteworthy case for investors using a high growth momentum strategy paired with technical breakout analysis. This method finds companies with good fundamental growth features while also displaying positive technical patterns that indicate possible upward price movement. The system uses ChartMill's own ratings model, which assesses stocks on three important aspects: High Growth Momentum Rating for earnings speed and fundamental condition, Technical Rating for general trend condition, and Setup Quality Rating for finding consolidation patterns that come before possible breakouts.

High Growth Momentum Fundamentals

Lumentum's High Growth Momentum Rating of 6 shows good fundamental growth features that momentum investors usually want. The company displays notable earnings speed, especially in recent quarters, with several important measures being prominent:

• Quarterly EPS growth rose to 1,366.67% in the most recent quarter compared to the same period last year
• Revenue growth increased to 55.92% in the latest quarter, showing clear improvement from earlier quarters
• Full-year EPS growth hit 100.98%, signaling large profitability gain
• The company exceeded EPS estimates in all of the last four quarters by an average of 19.06%

These growth measures match what high growth momentum investors focus on, companies displaying speeding up earnings and revenue growth, positive earnings surprises, and good year-over-year gains. The speed increase in both EPS and sales growth across recent quarters indicates the company is building operational speed, which frequently comes before continued good performance.

Technical Strength and Market Position

Lumentum's technical condition looks very strong, receiving a complete Technical Rating of 10 from ChartMill. The technical analysis report shows several positive features:

• Both short-term and long-term trends stay firmly positive
• The stock does better than 96% of all stocks in the market on a yearly performance basis
• All important moving averages (20-day, 50-day, 100-day, and 200-day) are increasing and placed below the current price
• The stock trades close to its 52-week high while keeping steady upward speed

The stock's relative strength ranking of 96.32 shows it is doing much better than the wider market, an important feature wanted by momentum investors. Within the Communications Equipment industry, Lumentum does better than 82% of its competitors, showing industry leadership.

Setup Quality and Trading Considerations

With a Setup Rating of 7, Lumentum shows a reasonable consolidation pattern that technical traders often search for before possible breakouts. The stock has been trading in a set range between $144.52 and $178.49 over the last month, with current prices consolidating in the middle of this range. This pattern indicates the stock may be gathering energy for its next directional move.

The technical analysis finds clear support and resistance levels that help outline risk parameters:

• Main support is present between $160.74 and $163.44, made by several trendlines and moving averages
• Resistance is at $171.51 from a recent horizontal price level
• The setup indicates a possible entry above $171.52 with a stop loss below $160.73

This consolidation pattern, joined with the stock's good technical base, forms what technical analysts often call a "spring-loaded" setup, where a stock with good fundamentals and technicals consolidates before possibly breaking out to new highs.

Investment Implications

For growth momentum investors, Lumentum stands as an interesting possibility that joins speeding fundamental growth with good technical placement. The company's extraordinary EPS growth speed, particularly the 1,366% rise in the most recent quarter, shows the type of operational speed that often draws growth investors. At the same time, the technical setup gives a defined risk structure for entry, which interests technically-focused traders.

The combination of these elements, good growth measures, complete technical rating, and reasonable setup quality, indicates Lumentum deserves notice from investors using this strategy. However, as with any investment method, correct position sizing and risk management stay important, especially given the stock's higher performance over the last year.

For investors wanting to find similar possibilities, more screening results are available through the High Growth Momentum Breakout Setups Screen, which regularly finds stocks meeting these specific requirements.

Disclaimer: This analysis is for informational purposes only and does not constitute investment advice, recommendation, or solicitation to buy or sell any securities. Investors should conduct their own research and consult with a qualified financial advisor before making investment decisions. Past performance does not guarantee future results.