For investors aiming to join strict technical rules with a focus on fundamental growth, a plan mixing Mark Minervini’s Trend Template with a High Growth Momentum (HGM) screen can be an effective way. This process first checks that a stock is in a verified, strong uptrend by passing Minervini’s exact technical rules. It then adds a need for solid underlying business momentum, sorting for companies with quickening earnings, sales, and favorable estimate changes. The aim is to find market leaders that are both technically sound and supported by getting better fundamentals, placing them for possible further strong performance.
Silicon Motion Technology Corp. (NASDAQ:SIMO) appears as a present candidate from this mixed screening process, offering a strong case for more review by growth-focused investors.
Technical Strength: Matching the Minervini Trend Template
The foundation of Minervini’s plan is his Trend Template, a group of fixed technical rules made to filter for stocks in a clear Stage 2 advance. SIMO presently meets these important conditions, which are needed for making sure an investor is buying into confirmed strength instead of trying to buy a declining stock.
- Price Above Important Moving Averages: The stock’s last price of $134.88 trades well above its rising 50-day ($110.35), 150-day ($94.40), and 200-day ($87.52) simple moving averages (SMAs). This order confirms the stock is in a clear uptrend across all main timeframes.
- Moving Average Order: The 50-day SMA is positioned above both the 150-day and 200-day SMAs, while the 150-day SMA is above the 200-day SMA. This "stacked" order is a standard sign of a solid, good trend where shorter-term momentum guides longer-term direction.
- Nearness to Highs: SIMO is trading within 7% of its 52-week high of $144.68, meeting the Trend Template’s need to be within 25% of the high. Also important, the current price is over 260% above its 52-week low of $37.21, well passing the 30% minimum. This shows major recovery and momentum.
- Strong Relative Strength: With a ChartMill Relative Strength (CRS) score of 96.42, SIMO is doing better than over 96% of the whole market. High relative strength is a main idea of Minervini’s method, as it finds sector and market leaders that often lead rallies.
Fundamental Momentum: The High Growth Investor Argument
While the Trend Template confirms a good technical wind is behind the stock, the High Growth Momentum filter looks at the engine pushing that move. SIMO’s recent fundamental performance shows signals of a major turning point, which is exactly what growth investors look for.
- Earnings Quickening: After a time of decrease, the company’s most recent quarterly earnings per share grew 38.5% year-over-year. Maybe more significantly, analyst estimates plan for fast growth of 121.5% for the coming quarter, pointing to a sharp good change in the business view.
- Sales Re-acceleration: Revenue growth has turned clearly positive. The last quarter saw sales jump 45.7% compared to the same time last year, a major gain from the drops seen in earlier quarters. Estimates show continued solid growth of 83.6% for the next quarter.
- Estimate Changes: Analysts have been increasing their forecasts, an important signal for momentum plans. Over the past three months, the average revenue estimate for the next year has been adjusted up by 1.8%. While the next-year EPS estimate had a small downward adjustment, the strong upward adjustments for the very near next quarter show near-term confidence.
- Steady Execution: The company has a solid history of passing expectations, beating revenue estimates in each of the last four quarters and EPS estimates in three of the last four.
This mix of re-accelerating top-line growth, a planned rise in bottom-line profit, and positive analyst feeling gives the fundamental "catalyst" that Minervini’s SEPA (Specific Entry Point Analysis) method looks to find next to a solid technical setup.
Technical Condition and Setup Review
ChartMill’s own analysis gives a measured summary of SIMO’s technical position. The stock gets a perfect Technical Rating of 10/10, showing very good condition across all checked metrics. The report states both short-term and long-term trends are positive, and the stock’s gains over the past year have been steady. With a Relative Strength rank above 96 and trading near its 52-week high, SIMO shows the traits of a market leader.
From a timing view, the analysis gives a Setup Rating of 6/10. The report shows lower volatility and price consolidation in the recent time, with very little overhead resistance. This suggests the stock may be resting within its uptrend, possibly preparing for its next move up. A full breakdown of support levels, resistance, and a sample trade setup can be seen in the full ChartMill Technical Report for SIMO.
Conclusion
Silicon Motion Technology offers a case where a strict, rules-based screening process finds agreement between technical momentum and fundamental gain. The stock clearly passes the disciplined technical rules of the Minervini Trend Template, trading in a strong uptrend with high relative strength. At the same time, its recent financial results and analyst plans point to a strong growth story is forming, shown by re-accelerating sales and a planned jump in earnings.
For investors using a plan that looks for solid trends supported by fundamental catalysts, SIMO deserves more study. As always, any investment choice should be made on personal research and risk comfort.
Interested in finding other stocks that pass this mixed screen for technical strength and high growth momentum? You can review the present results using the High Growth Momentum + Trend Template screen on ChartMill.
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Disclaimer: This article is for informational and educational purposes only. It is not intended as investment advice, nor does it constitute a recommendation to buy, sell, or hold any security. The analysis is based on data provided and screening methodologies described, which have inherent limitations. Investors should conduct their own due diligence and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results.
