The short version
Mark Minervini buys stocks that are already going up. Before he looks at a company's story, the chart has to show a strong, established uptrend, which he tests with eight rules he calls the Trend Template. From the stocks that pass, he wants fast-growing earnings, a reason for the stock to move, and a tight, quiet base to buy from. Then he keeps losses small and lets the winners run.
It is a demanding method, and most of it can be checked on a chart. That is why it suits a site like this one.
Who he is
Minervini is an American stock trader, best known for two results in the US Investing Championship, a real-money trading contest: in 1997 he won with a 155% return, and in 2021 he won the $1 million-and-up division with 334.8%, the highest in that division's history. Jack Schwager included him in Stock Market Wizards, his book of interviews with top traders.
He has written about his method in several books and teaches it to other traders. The part most people know is the Trend Template.
SEPA: five questions before every buy
Minervini calls his method SEPA, short for Specific Entry Point Analysis. It asks five things of a stock:
- Trend. Is the stock already in a strong uptrend? This is the Trend Template's job.
- Fundamentals. Are earnings and sales growing fast, and ideally accelerating?
- Catalyst. Is there a reason for the market to pay more: a new product, a new market, a change in the industry?
- Entry point. Has the stock formed a tight base, so there is a precise, low-risk place to buy?
- Exit. Where will you sell if you are wrong, and how will you take profits if you are right?
The first and fourth can be measured from prices. The second and third need reading. The fifth is discipline.
The Trend Template
The template is a gate. A stock that fails it is not considered at all, however good the story.
- Price is above both the 150-day and the 200-day moving average
- The 150-day moving average is above the 200-day
- The 200-day moving average is trending up
- The 50-day moving average is above both the 150-day and the 200-day
- Price is above the 50-day moving average
- Price is at least 30% above its 52-week low
- Price is within 25% of its 52-week high
- Relative strength rank is 70 or better
Taken together, the eight points describe a stock in Stage 2: rising averages stacked in the right order, price well off its lows and near its highs, and stronger than most of the market. We run all eight on every US stock after each close.
The volatility contraction pattern
Passing the template says a stock is worth watching. The VCP says when to buy it.
In a healthy base, each pullback is shallower than the last: a stock might drop 25% from its high, recover, drop 12%, recover, then drop only 6%. Volume dries up as the swings narrow. That tightening is supply running out: the sellers who wanted out have mostly gone. The buy point, which Minervini calls the pivot, is when price clears the top of the last and tightest contraction on rising volume.
A VCP is a shape you read on a chart, so no screen reproduces it exactly. What a screen can do is find stocks in a Trend Template uptrend whose range is narrowing and volume is falling, so you have a short list of charts to study.
How he manages risk
Minervini is as known for his losses as for his wins, because he keeps them small. He decides before buying where he will sell if the trade fails, sizes the position so that a loss at that point is a small part of the account, and cuts it without arguing. A winner is given room and its stop is raised as it rises. His view is that a handful of large winners pays for many small losses, as long as no loss is allowed to grow.
Minervini and stage analysis
Minervini uses the same four stages that Stan Weinstein described: basing, advancing, topping and declining. He buys only in Stage 2. The Trend Template is a precise, rule-based test for it, which is why the stocks that pass it and the stocks our model puts in Stage 2 overlap so much. Where they differ is in timing: a stock can pass the template late in a long advance, when the best entry has passed.
How the Trend Template and stage analysis compare →
His books
- Trade Like a Stock Market Wizard (2013): the method in full, SEPA, the Trend Template and the VCP.
- Think & Trade Like a Champion: how he plans, enters and manages trades.
- Mindset Secrets for Winning: the mental side of trading and competing.
- Momentum Masters, with David Ryan, Dan Zanger and Mark Ritchie II: a roundtable on how each of them trades.
Every US stock that passes all eight points, with the count for each rule, updated after each close.
Questions people ask
Who is Mark Minervini?
An American stock trader and author. He won the US Investing Championship in 1997 with a 155% return and again in 2021, in the $1 million-and-up division, with a record 334.8%. Jack Schwager profiled him in Stock Market Wizards, and his own books set out the method he calls SEPA.
What is Minervini's SEPA method?
SEPA stands for Specific Entry Point Analysis. It looks for stocks that are already in a strong uptrend, have fast-growing earnings and sales, and have a reason to move, then waits for a precise, low-risk point to buy, usually the breakout from a tight base, with the exit decided before the purchase.
What is the Trend Template?
Eight rules a stock must pass before Minervini will consider it: price above the 150-day and 200-day moving averages, the 150-day above the 200-day, the 200-day rising, the 50-day above both, price above the 50-day, at least 30% above the 52-week low, within 25% of the 52-week high, and a relative strength rank of 70 or better.
What is a volatility contraction pattern (VCP)?
A base in which each pullback is smaller than the one before, for example 25%, then 12%, then 6%, while volume dries up. It shows sellers running out. The buy point is when price clears the top of the last, tightest contraction on rising volume.
Does Minervini use stage analysis?
Yes. He describes the same four stages Stan Weinstein did and buys only in Stage 2, the advancing stage. His Trend Template is, in effect, a precise test for Stage 2.