Mark Minervini's Trend Template Explained Simply

Hello traders,

in this short post we talk about Mark Minervini’s Trend Template and how to apply it.

The Minervini Trend Template is one of the most important building blocks of the SEPA method Mark developed. SEPA stands for Specific Entry Point Analysis.

Mark’s Trend Template is one of the so-called non-negotiable criteria. As long as a stock does not meet the Trend Template, it is of no interest at all - even if every other condition is met. The one exception is the Power Play setup, also known as the High Tight Flag or bull flag.

Mark Minervini’s Trend Template - what is it?

To understand Mark Minervini’s Trend Template, you need to know Stan Weinstein’s Stage Analysis model. Weinstein, just like William O’Neil, Nicolas Darvas and Jesse Livermore, was something of a companion on the way to the SEPA approach Minervini developed.

In his book “Stan Weinstein’s Secrets for Profiting in Bull and Bear Markets”, Stan Weinstein describes a model made up of four stages. These stages are:

• Neglect phase
• Advancing phase
• Topping phase
• Declining phase

Since I promised to keep this post short, I will only describe the stages briefly.

• Neglect phase: The period in which a stock does nothing. It moves sideways for weeks and months.
• Advancing phase: This is the icing on the cake we are looking for. A dynamic breakout from the range takes place. The stock moves up quickly and dynamically.
• Topping phase: This is where the top forms. After a long move the stock becomes restless and volatility increases. The stock no longer manages to make new highs.
• Declining phase: The stock fails to shake off the volatility or make new highs and is therefore sold off.

This is where Mark Minervini’s Trend Template comes in. The Trend Template helps us identify Stage 2. After all, we only want to be in the market when our odds are best.

How is Mark Minervini’s Trend Template structured?

Many people don’t know that Minervini uses two different versions of the Trend Template. The differences are small, but still extremely important. In both cases the chart setup helps us clearly identify the so-called Stage 2. I explain further below when to use which version. For now it is only important that you know there are two versions and where they differ.

We also cover relative strength according to IBD. Without this important parameter the picture can be distorted.

The Trend Template for an early turn

• The price must be above the 150-day SMA and the 200-day SMA.
• The 150-day SMA must cross the 200-day SMA from below.
• The 200-day SMA must have been trending up for AT LEAST one month.
• The 50-day SMA is above the 150-day SMA and the 200-day SMA.
• The current share price must be above the 50-day SMA.
• The current share price is at least 30% above its 52-week low.
• The current share price is no more than 25% below its 52-week high.
• The IBD (Investor’s Business Daily) relative strength is greater than 70.

The long-running Trend Template

• The price must be above the 150-day SMA and the 200-day SMA.
• The 150-day SMA must cross the 200-day SMA from below.
• The 200-day SMA must have been trending up for AT LEAST four months.
• The 50-day SMA is above the 150-day SMA and the 200-day SMA.
• The current share price must be above the 50-day SMA.
• The current share price is at least 30% above its 52-week low.
• The current share price is no more than 25% below its 52-week high.
• The IBD (Investor’s Business Daily) relative strength is greater than 90.

About IBD relative strength

IBD’s relative strength calculation helps find the top performers in the market. The Relative Strength Rating is based on a stock’s percentage price change over the last 12 months. The most recent three-month period is weighted at 40%, the other three quarters at 20% each. All stocks are ranked by their percentage price change and receive a percentile rank from 99 (highest) to 1 (lowest).

How do you apply Mark Minervini’s Trend Template?

Before we get to the application, it is important to know what the Trend Template is and what it is not. As mentioned, Minervini’s Trend Template helps us identify Stage 2. But it is NOT an entry signal. Mark’s entry signals are:

• The VCP: Volatility Contraction Pattern
• The base breakout pattern
• Cup with handle
• The two-step or three-step reversal

I will explain these entries in a follow-up post.

Back to the Trend Template:

The early-turn Trend Template is used after sharper market corrections to find stocks that have recovered relatively quickly. Here we are betting on a general market recovery and want to get in while there is still plenty of “meat on the bone”. In this case a relative strength of 70 is enough. Important: relative strength should rise quickly.

The long-running Trend Template is used in mature bull markets to find stocks that hold up steadily for weeks and months. Here the focus is on an IBD relative strength of at least 90. A high relative strength ensures that we are invested in stocks of the dominant companies.

What are the benefits of Minervini’s Trend Template?

Now that you know everything there is to know about the Minervini Trend Template, I assume this question answers itself. If not, here is a summary of the benefits:

• With the Minervini Trend Template you make sure your stocks are in Stage 2. Stage 2 is the phase in which a stock rises disproportionately within a relatively short time.
• You make sure you are invested in stocks that are in a defined uptrend.
• Applying relative strength within the Trend Template filters out weak stocks.
• The Trend Template helps with your market preparation. Every stock that does not meet the Trend Template is ignored.
• Combined with other components of Minervini’s SEPA strategy, you narrow your stock selection down drastically and end up with only the best stocks for your watchlist.

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