For investors aiming to find high-potential growth stocks, using a strict technical system with attention to fundamental momentum can be an effective method. One such technique is the strategy made popular by Mark Minervini, which focuses on the Specific Entry Point Analysis (SEPA) system. This method sorts for stocks showing solid, confirmed uptrends with an exact Trend Template, and then adds fundamental filters to verify the company is showing quickening business results. The aim is to locate market leaders early in their growth phases, where firm price movement is supported by sound and getting better financial numbers.
REDDIT INC-CL A (NYSE:RDDT) presents a strong case for study using this combined view. The social media platform, which became publicly traded in March 2024, has displayed notable price momentum since its first offering, justifying a more detailed examination from both a trend-following and growth-investing viewpoint.
Technical Fit with the Minervini Trend Template
The main element of the Minervini strategy is finding stocks in a clear Stage 2 upward move, verified by a particular group of moving average and price rules. An examination of Reddit's chart and main measures shows it fits the central parts of the Trend Template:
- Price Above Main Moving Averages: The present price trades above the rising 50-day, 150-day, and 200-day simple moving averages (SMAs). This arrangement shows continued buying interest across short, intermediate, and long-term periods.
- Moving Average Arrangement: The 50-day SMA ($205.18) is located above both the 150-day ($181.57) and 200-day ($166.39) SMAs, while the 150-day SMA also trades above the 200-day. This ordered positive arrangement is a standard sign of a firm uptrend, a required filter in the Minervini process to confirm one is purchasing strength, not weakness.
- Nearness to Highs: The stock is trading within 25% of its 52-week high of $282.95, another important Minervini rule that directs attention to market leaders, not underperformers. At the same time, the current price stays more than 30% above its 52-week low, confirming a major recovery trend is established.
- Better Relative Strength: With a ChartMill Relative Strength (CRS) score of 85.32, Reddit does better than about 85% of the wider market. Minervini notes that the largest winners usually have high relative strength, as it indicates institutional buying and leadership.
This technical view indicates Reddit is in a clear uptrend, meeting the first "trend" part of the SEPA method. The strategy states that the best chances appear in stocks that are already in a Stage 2 upward move, as these are the issues most probable to keep their better performance.
Fundamental Momentum for High-Growth Investors
While the Trend Template deals with the "when," the "why" is frequently located in the fundamentals. For high-growth investors, the story is backed by Reddit's quickening financial performance, which fits with the fundamental filters used to find "super performers."
- Very High Earnings Growth: The company has reported very high year-over-year earnings growth in recent quarters. The latest quarter showed EPS growth of 400%, followed by 850% in the quarter before. This sequence of huge quickening is precisely what growth filters aim to find, as it often comes before major price reevaluations.
- Steady Revenue Quickening: Top-line growth is solid and quickening, with recent quarterly sales growth numbers of 67.9%, 77.7%, and 61.5%. This shows that user activity and monetization work are gaining effective momentum.
- Positive Earnings Surprises and Changes: Reddit has exceeded analyst EPS estimates in each of the past four quarters, with an average beat of 180%. Also, analysts have increased their earnings estimates for the next year by almost 17% over the past three months. Minervini points out that upward changes are a main catalyst, showing rising belief in the company's future potential.
- Growing Profitability: Maybe most significantly, the company's profit margin has grown greatly, from 6.7% two quarters ago to 27.8% in the most recent report. This gain in operational efficiency is a key sign of a business moving from pure growth to profitable growth, a very appealing stage for investors.
These measures together create a view of a company reaching a turning point. The high-growth momentum is not based on guesswork but on measurable, quickening financial outcomes. This fundamental strength gives the "catalyst" and basic quality that the Minervini strategy needs to add to a firm technical picture.
Technical Condition and Present Setup Evaluation
According to ChartMill's own analysis, Reddit receives a good Technical Rating of 7 out of 10, confirming the stock is in a healthy uptrend. The report states the short-term trend is positive and that RDDT is a top performer in its industry. However, the analysis also gives a note of warning for entry timing. The Setup Quality rating is a lower 3, showing that after its recent firm price move, the stock may be overstretched and unstable in the short term. The summary proposes waiting for a time of consolidation to present a more favorable, lower-risk entry point, a idea that fits with Minervini's focus on exact, low-risk entry points during instability reductions.
For a detailed summary of support levels, trend analysis, and the full technical view, you can examine the complete ChartMill Technical Report for RDDT.
Locating Comparable Chances
Reddit shows the kind of security that results from a strict search for high-growth momentum inside a firm technical trend. Investors curious in using this combined filtering method can find other possible choices using the preset screen that found RDDT. You can run this "High Growth Momentum + Trend Template" screen yourself here to search the present market for comparable setups.
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 provided 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.
