SCHWAB (CHARLES) CORP (NYSE:SCHW) Presents a High-Growth Momentum and Technical Breakout Opportunity

In the current market environment, where the S&P 500 shows positive momentum in both the short and long term, investors often look for strategies that join strong fundamental growth with good technical patterns. One such approach involves screening for stocks that show high growth momentum, as defined by accelerating earnings and sales, next to good technical health and a clear consolidation pattern indicating a possible breakout. This method tries to find companies not only growing at a notable rate but also set for a possible continuation of their price appreciation.

SCHWAB (CHARLES) CORP (NYSE:SCHW) appears as a candidate that matches this multi-faceted strategy. The company, a leading provider of wealth management, securities brokerage, and banking services, has shown a clear combination of fundamental strength and technical setup quality.

High Growth Momentum Fundamentals

For growth momentum investors, the path of a company’s earnings is very important. The ChartMill High Growth Momentum Rating for SCHW is a good 6, showing positive momentum across several key criteria needed for this strategy. This rating brings together different parts of short-term earnings momentum, which are vital for finding companies in a strong growth phase.

• Notable Quarterly EPS Growth: SCHW has shown large quarterly earnings acceleration. The most recent quarter had a year-over-year EPS growth of 56.2%, a clear rise from the 40.5% growth reported in the prior quarter. This acceleration is a key part of the momentum rating, indicating improving profitability.
• Positive Analyst Revisions: The average analyst estimate for next year’s EPS has been moved upward by 7.36% over the last three months. Such revisions are a strong positive signal within the momentum framework, showing that professional analysts are becoming more positive about the company’s near-term future.
• Growing Profit Margins: The company’s profit margin has grown steadily, getting to 29.0% in the last reported quarter, up from 27.0% and 25.8% in the earlier quarters. Growing margins point to operational efficiency and pricing power, which are highly valued by growth investors.
• Steady Earnings Surprises: SCHW has beaten EPS estimates in each of the last four quarters, with an average surprise of 2.93%. This history of exceeding expectations builds trust in management’s guidance and the company’s ability to perform.

Technical Strength and Setup Quality

While strong fundamentals are important, the technical picture decides the best entry point. According to the detailed technical analysis report, SCHW presents a strong case from a chart perspective. The stock gets a high Technical Rating of 8, showing its good overall health, and an equally strong Setup Rating of 8, indicating a well-defined consolidation pattern.

• Strong Long-Term Trend: The long-term trend for SCHW is seen as positive, and the stock has done better than 83% of the market over the past year. This matches the momentum strategy’s focus on market leaders.
• Consolidation within an Uptrend: The technical report states that SCHW has been trading in a range between about $90.50 and $97.74 over the past month, a period of consolidation that has helped lower volatility. This forms a possible base from which the next move up could start.
• Clear Support and Resistance: The analysis finds a major support zone between $91.03 and $93.28, made by a mix of trend lines and moving averages. A clear resistance area exists between $97.08 and $98.69. This defined structure allows for a disciplined trading approach, with a logical level for a stop-loss order below support and a breakout level above resistance.

A Combined Opportunity for Momentum Investors

The coming together of SCHW’s high growth momentum fundamentals and its high-quality technical setup makes it a notable candidate. The company is showing accelerating earnings growth and positive analyst sentiment, which are essential for momentum investing. At the same time, its chart shows a healthy pause in a longer-term uptrend, providing a possible entry point for investors looking to take part in an expected continuation of the trend. The automated analysis even proposes a hypothetical trade setup with an entry point near $94.94, just above recent highs, and a stop-loss below the support zone, showing the practical use of this combined analysis.

For investors interested in finding other stocks that meet similar criteria of strong growth momentum and good technical setups, you can check the predefined screen here.

Disclaimer: This article is for informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any securities. The analysis presented is based on data provided and should not be relied upon as the sole basis for an investment decision. Always conduct your own research and consider your individual financial situation before trading.