Earnings Acceleration

When evaluating growth stocks, Minervini focuses on three fundamental metrics: earnings, sales, and margins — and almost nothing else. He has detailed frameworks for analyzing these, covered in his book, including how to read breakout years, earnings acceleration, and margin expansion. His argument: for a growth stock, everything important about the business is captured in these three numbers and how they're trending. If you can read them well, you know whether the engine is accelerating or decelerating.

Ted walks through the GLD trade as a case study in a non-earnings momentum setup: gold has no EPS, but it checks every other magic elixir criterion — narrative (de-dollarization, debt, geopolitics), liquidity, high linearity, and a 10-year cup-with-handle base. He initially passed on an earlier base feeling it was too slow, then re-entered when gold reclaimed all moving averages with tight volatility. Partial sells were triggered by ATR extension signals, and the final exit came when gold closed below the 10 EMA — coinciding with futures closing below the same level and a macro shock (hawkish Fed chair nomination + CME margin hike) that forced a liquidation cascade. The lesson: commodity trade exits require cross-referencing the futures chart, not just the ETF.

Kristjan frames fundamentals and momentum as two distinct but related forces: fundamentals are the fuel, momentum is what happens after the fuel ignites. Studying the biggest winning stocks across market history, he found that most multi-year moves were driven by strong earnings acceleration and revenue growth that gave investors a clear reason to re-rate the stock higher. Combining fundamental strength with the breakout method gives a significant edge: the fundamentals provide conviction, help identify which bases are worth watching, and distinguish genuine leaders from random movers. He acknowledges some breakout traders ignore fundamentals entirely, but for him knowing the story behind a stock makes the difference in holding through volatility.

A technically sound chart pattern alone is not a setup: stocks move for reasons — accelerating earnings, sector themes, company-specific catalysts — and traders who ignore the why behind a move work at a systematic disadvantage. The first task for any new trader is not to invent a method but to copy one that is already proven. Pradeep started by implementing a short-term trading system from the book Hedge Fund Edge exactly as written for two full years before modifying it, and credits this approach — replicating a working framework before improvising — as essential for building early competence and avoiding the trap of reinventing the wheel while still bleeding capital.

"A good chart itself is not a setup. You have to find a chart which is good and there has to be some reason why the stock is going to go up — it might be a theme, a sector, an earnings catalyst — but that particular stock should have a reason to go up."

Pradeep traces his accidental entry into trading: arriving in the US in 1998 during the dot-com bubble, reading trading books in a California bedroom while working on a failed startup, then helping his ex-wife manage declining tech shares. His first quantum leap came from a single paragraph describing how stocks with massive earnings acceleration — 300% to 2,600% profit growth — can double or triple in weeks. The next morning he found USLB (US Laboratories) reporting 2,600% profit growth and 900% sales growth, put all his money in, and made more in six weeks than he had ever imagined: the birth of the EP momentum strategy. He then describes the god syndrome — the overconfidence that follows a major winning streak — as a reliable precursor to drawdowns, and explains his self-regulatory habit of reducing position size and writing reminders when he starts feeling invincible.

"It's a heady feeling when you make half a million, one million very quickly — you start believing your own bull. The market will invariably teach you a lesson once you get that god kind of syndrome."