For investors looking to join solid earnings momentum with positive chart patterns, a multi-layered screening method can be very useful. One approach is to select for stocks that show firm basic growth foundations, as shown by a High Growth Momentum (HGM) rating, while also having technical strength and a favorable price formation. This method tries to find companies where notable earnings speed is meeting a technically good stock ready for a possible price move. VALERO ENERGY CORP (NYSE:VLO) appears as a stock that fits these joined conditions, offering a case for examination by growth and momentum-oriented investors.
High Growth Momentum Basics
The center of the method starts with finding companies showing important earnings force and good movement in their business direction. ChartMill's High Growth Momentum Rating brings together several main growth and movement measures into one number. For VLO, this rating is 6, pointing to a firm basic growth picture that deserves more study. The rating is made from parts vital for momentum investors, like earnings speed changes, estimate changes, and profit margin growth.
A closer view of the given data shows the specific reasons for VLO's number:
- Notable Recent EPS Growth: The latest quarter's earnings per share rose by 496.9% against the same quarter last year. While the earlier quarter's growth was also firm at 221.1%, this large step-by-step rise is a sign of positive earnings movement.
- Steady Earnings Surprises: The company has passed EPS estimates in all of the last four quarters, with a typical surprise of 43.5%. This steady better-than-expected performance hints that management action may be beating market forecasts.
- Positive Analyst Changes: Analyst feeling has become clearly positive, with the typical estimate for next year's EPS changed upward by 43.2% over the last three months. Such notable changes often come before more price movement as the market includes new forecasts.
- Profit Margin Growth: Looking at quarterly patterns, VLO's profit margin has shown step-by-step gain, changing from 2.38% two quarters ago to 3.72% in the last reported quarter. Growing margins can point to better operational efficiency and pricing force, a main part of lasting growth.
It is needed to frame these numbers; the refining field is cyclical, and year-over-year comparisons can change. Still, the mix of very large quarterly EPS growth, steady beats, and rising analyst forecasts forms a positive story of current good movement, which is exactly what the HGM rating is made to find.
Technical Strength and Formation Quality
Firm basics are most effective when joined with a supportive price chart. According to the detailed technical report, VLO does very well here, having a perfect ChartMill Technical Rating of 10. This highest rating shows very good technical condition across several time periods.
Main technical points include:
- Firm Long-Term Direction: The long-term direction is rated as positive, with the stock price trading well over its main moving averages (50-day, 100-day, and 200-day SMAs), all of which are rising. This points to continued institutional buying and a clear upward direction.
- Market Outperformance: VLO shows firm relative strength, doing better than 93% of all stocks in the market over the past year and 83% of its group in the Oil, Gas & Consumable Fuels industry. Leading within a field is a vital feature for momentum stocks.
- Pause Within Uptrend: While the long-term direction is positive, the short-term direction is neutral. This has led to a pullback or pause over the past month inside a wider upward direction. Such action is normal and can create the conditions for the next upward step.
This pause is what gives VLO its Setup Rating of 7. The report states that "prices have been pausing lately," which has made a set trading area with clear support and resistance points. For a momentum investor, this offers a possible chance. The formation points to an entry point just over the noted resistance zone near $254.34, with a stop-loss point under support around $235.08. This frame allows for a set risk measure on a trade that tries to benefit from a price move out of the recent pause, continuing the main upward direction.
A Meeting Chance
VALERO ENERGY CORP offers a case where basic movement and technical position meet. The company is showing very large quarterly earnings growth, positive estimate changes, and margin gain, main parts that support high-growth momentum methods. At the same time, the stock chart shows this strength, having market-leading relative performance inside a firm long-term upward direction that is now waiting in a pause pattern. This mix of a high HGM rating, a highest-level technical rating, and a positive setup rating is what the first screen was made to find.
For investors wanting to study other stocks that fit this exact blend of growth movement and technical formation needs, more results can be seen by using the High Growth Momentum Breakout Setups screen.
Disclaimer: This article is for information only and is not financial advice, a support, or a suggestion to buy, sell, or hold any security. The study is based on given data and should not be the only base for an investment choice. Investors should do their own full study and think about their personal money situation and risk comfort before making any investment.