PennyMac Financial Services (NYSE:PFSI) Meets Minervini's SEPA Strategy with Strong Technicals and Fundamentals

For investors aiming to join strict technical rules with a focus on fundamental expansion, the method created by Mark Minervini offers a strong framework. This process, frequently called the SEPA (Specific Entry Point Analysis) strategy, methodically finds market leaders by merging two key filters. First, it uses the "Trend Template," a fixed group of technical rules made to verify a stock is in a solid, confirmed uptrend. Second, it adds fundamental screens to confirm the company shows the sharp earnings and sales expansion that usually supports lasting price gains. This two-part method tries to locate stocks that are both technically sound and fundamentally set for ongoing progress.

PennyMac Financial Services Inc (NYSE:PFSI) stands as a present option that seems to meet the main principles of this merged strategy, having been found by a filter that looks for both the Minervini Trend Template and a high growth momentum score.

Checking the Technical Base: The Trend Template

Minervini's Trend Template is formed on the idea that the largest gainers are already in definite, lasting uptrends before they make their biggest climbs. It serves as a quality checklist, removing less strong stocks. A check of PFSI's chart and main numbers shows it fits these strict technical conditions:

• Price Above Main Moving Averages: The stock's present price trades well above its rising 50-day, 150-day, and 200-day simple moving averages. This order shows positive momentum across short, medium, and long-term periods.
• Moving Average Order: The 50-day moving average is above both the 150-day and 200-day averages, and the 150-day is above the 200-day. This step-by-step, upward order is a standard mark of a solid Stage 2 climb.
• Nearness to Highs: PFSI is trading within 3% of its 52-week high, showing it is with the leaders in its field and not stuck far from its top. At the same time, the stock price is more than 50% above its 52-week low, confirming a major recovery and uptrend are already active.
• Better Relative Strength: With a ChartMill Relative Strength (CRS) score of 83.29, PFSI is doing better than most of the wider market. This high relative strength is a key part of the Minervini process, as it finds stocks that are drawing institutional money and leading the market up.

This technical view meets the Trend Template's main aim: to make sure an investor is only looking at stocks where the easiest direction is clearly up, thus improving the chances for success.

Checking the Growth Driver: Fundamental Momentum

While a solid chart is necessary, Minervini states that it must be backed by strong fundamental expansion, the "driver" behind the climb. The filter that found PFSI also needed a high growth momentum (HGM) score, which searches for speeding financial results. The company's recent reports show several good points:

• Sharp Earnings Growth: The latest quarterly EPS jumped over 159% against the same quarter last year. This type of fast speed is precisely the event that can push and maintain a solid price trend.
• Strong Sales Growth: Backing the earnings jump, revenue for the last quarter grew by almost 54% year-over-year, showing good top-line momentum and market action.
• Growing Profitability: The company's profit margin in the last reported quarter moved to 20.56%, up from 11.94% two quarters before. This direction of growing margins points to not just expansion, but higher-quality, more profitable expansion, a main factor for lasting results.
• Positive Estimate Changes: Analysts have raised their earnings estimates for the next fiscal year by over 10% in the last three months. This upward change pattern often comes before more institutional buying and price momentum.

These fundamental items give the "reason" behind the stock's solid technical state. They match the Minervini strategy's look at companies seeing major, real gains in their business, which then draws the lasting buying interest that forms winning stocks.

Technical Condition and Setup Summary

Beyond the exact Trend Template conditions, a wider view of PFSI's technical condition is positive. ChartMill's own study gives the stock a very high Technical Rating of 10 out of 10, showing great strength across many time periods. The long-term and short-term trends are both scored as positive. Also, the study notes a good Setup Rating of 9, showing the stock is now forming a fairly tight area after its recent climb, which may give a more clear entry point for investors.

The technical report finds a clear support area near $132 and a resistance zone just above present levels around $135-$136. A clear move above this resistance on high volume could be seen as a positive technical event. For a full look at the support, resistance, and trade setup study, you can see the full technical report for PFSI.

Conclusion

PennyMac Financial Services shows a case where a solid technical trend seems to be supported by strong fundamental expansion. It shows the kind of setup the merged Minervini and high-growth momentum filter tries to locate: a market leader in a clear uptrend, driven by speeding earnings and sales. For investors using such a strict, growth-focused method, PFSI calls for more review to see if its present forming period leads to the next phase of its climb.

Interested in locating similar options? The filter that found PFSI is made to look for stocks that meet both technical and high-growth fundamental conditions. You can look at more possible ideas by seeing the High Growth Momentum + Trend Template filter results.

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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 data provided and certain screening methodologies. Always conduct your own thorough research, consider your financial situation and risk tolerance, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results.