The Trend Template: Eight Structural Criteria Most Traders Miss

There is a reason the Trend Template has survived three market cycles, two paradigm shifts in market microstructure, and the rise of algorithmic flow with its structural integrity intact. It is not because Mark Minervini invented something novel. It is because he formalized, in eight precisely-worded conditions, what institutional trend-followers had been doing informally across different desks and different decades for nearly a century. The template is the most rigorous publicly documented answer to a single question: before a stock can explode, what configuration must already exist?

Most traders encounter the Trend Template, nod at its apparent simplicity, run it once on a screener, and then fail to internalize its deeper logic. They treat it as a checklist. It is not a checklist. It is a sequential confirmation that a stock has already moved through the phases of institutional accumulation and is now exhibiting the tape signature of a stage two advance. Missing any single criterion is not a cosmetic flaw. It is evidence of structural incompleteness — and structural incompleteness is what separates breakouts that run fifty percent from breakouts that fail inside two weeks.

What follows is an eight-layer autopsy of the template itself: what each criterion is actually measuring, why the filter exists at that position in the stack, and what it tells you about institutional behavior beneath the tape. And then something most practitioners never do — running the template across a full liquid universe to use its pass rate as a regime indicator in its own right.

The Architecture Behind the Eight

A common mistake is to assume that because several of the criteria involve moving averages, they are substantially redundant. They are not. Each of the eight filters eliminates a different category of structural failure, and collectively they form a layered screen that is mathematically non-redundant — a stock can satisfy seven criteria while failing the eighth for reasons that are uniquely diagnostic.

The criteria can be grouped into four functional layers. Layer one establishes absolute position — the stock must be trading above its key institutional averages. Layer two establishes relative configuration — the averages themselves must be stacked in the correct fan. Layer three establishes directional integrity — the longest-term average must be rising, and the stock must occupy a specific altitude band within its fifty-two-week range. Layer four establishes relative strength — the stock must be outperforming its peers, not merely appreciating in a rising tide.

Each layer catches different frauds. A stock in a counter-trend bounce will typically fail layer two. A bottom-fishing candidate will fail layer three. A sympathy mover riding an index rally will fail layer four. The template is deliberately over-specified relative to its apparent purpose, because institutional-grade advances are over-determined in exactly the same way: every true leader satisfies all eight conditions simultaneously.

Layer One — Price Relative to Its Moving Averages

Criterion 1: Price above the 150-day and 200-day averages

The two-hundred-day moving average is the closest approximation available to the average cost basis of long-term institutional holders. It compresses roughly ten months of closing prices into a single number. A stock trading above its two-hundred-day is, in aggregate, trading above the average entry price of the patient capital that bought it. That aggregate cohort has unrealized gains, which profoundly alters its behavior — holders sitting on gains sell less aggressively on pullbacks than holders sitting on losses. The supply dynamics above the two-hundred-day are categorically different from those below it.

The one-hundred-fifty-day average performs a similar function at an intermediate horizon — roughly seven months. Requiring price above both eliminates stocks where a recent rally has pushed price above the long-term average but where the intermediate trend remains incomplete. It is an insistence on dual confirmation: both the long-term holders and the intermediate-horizon swing cohort must be collectively profitable.

Criterion 5: Price above the 50-day average

The fifty-day average is the swing-trading horizon's equivalent of the two-hundred — roughly ten weeks, the duration over which most institutional position initiations are completed. Requiring price above the fifty extends the layering test into the short term. A stock can be above its two-hundred and its one-fifty while sitting below its fifty, and in that configuration, the most recent cohort of buyers is collectively underwater. That is precisely the condition that precedes a deeper correction, because recent buyers are the most likely to sell on any adverse move.

Layer Two — The Moving Average Stack

Criterion 4: The 50-day above the 150-day above the 200-day

This is the single most important criterion in the entire template, because it establishes what Stan Weinstein called the proper fan and what Weinstein himself identified as the structural signature of stage two. When the short-term average is above the intermediate, and the intermediate is above the long-term, the stock is, by construction, displaying an accelerating uptrend. The ordering of the averages is a mathematical statement about the second derivative of price: the rate of advance is itself increasing.

When this stack is inverted — fifty below two-hundred — a stock is in stage four decline, and no amount of base-building within that configuration produces durable breakouts. When the averages are tangled, crossing back and forth over each other, the stock is in stage one or stage three, a transitional regime where supply and demand are approximately balanced and directional conviction is low. Only the proper fan represents the regime in which institutional demand consistently overwhelms supply.

Criterion 2: The 150-day above the 200-day

This criterion appears redundant with the full stack in criterion four, but it is not. It is a softer version of the same logic that catches certain edge cases earlier. In the late stages of stage one — just as a stock is transitioning from accumulation to advance — the one-fifty can cross above the two-hundred several weeks before the fifty has climbed above both. Criterion two isolates that earlier configuration and ensures it is present before the template is deemed satisfied. In Weinstein's original stage analysis, this crossover is the earliest purely mechanical signal that stage two has begun.

Layer Three — Directional Integrity and Range Position

Criterion 3: The 200-day trending up for at least one month

A moving average can be above another moving average transiently during a counter-trend bounce within a broader downtrend. The two-hundred-day, by construction, takes weeks to change direction. Requiring that it has been rising for at least one month — and preferably four or five months — ensures that the underlying secular trend is up, not merely that a recent rally has produced a temporarily favorable configuration. In practice, this is the filter that most cleanly eliminates bear-market-bounce traps and failed attempted reversals.

The "one-month minimum" threshold is worth examining structurally. The two-hundred-day average moves by dropping the oldest price and adding the newest. For its slope to flip from negative to positive and remain positive for a full month requires, on average, twenty consecutive observations of new prices above the dropping prices. That is not a trivial condition. It represents roughly a calendar month of persistent net buying pressure at the long-term horizon, sustained across roughly two earnings-announcement cycles' worth of news flow.

Criterion 6: At least 30 percent above the 52-week low

This criterion is often misinterpreted as a quality filter. It is not. It is a stage filter. Its purpose is to eliminate stocks still in the earliest phases of a potential recovery — stocks where the base has not yet completed, where the right side of the cup has not yet formed, where the risk of relapse into stage four remains materially elevated.

The thirty-percent threshold maps onto a specific structural milestone. It corresponds, approximately, to the completion of a typical cup pattern's right side. A stock at its fifty-two-week low plus thirty percent has, in most cases, cleared its intermediate resistance and is beginning to approach its longer-term prior structural high. Below this threshold, the stock is still technically in a recovery from which it could still fail. Above it, the momentum has been confirmed by the simple passage of price through multiple resistance zones.

Criterion 7: Within 25 percent of the 52-week high

The mirror of criterion six. Where criterion six eliminates stocks that have not risen far enough, criterion seven eliminates stocks that have risen but then given back too much. The twenty-five-percent threshold is structurally calibrated: a stock more than twenty-five percent off its fifty-two-week high has, in almost all cases, violated at least one significant support level and has absorbed a round of distribution. Recovery from that position is possible but statistically uncommon without a full re-basing — and a re-basing stock, by definition, will have a new fifty-two-week high that has not yet been established.

Together, criteria six and seven define an altitude band — the stock must be high enough off its low to have confirmed recovery, but still close enough to its high to be extending rather than repairing. The band is narrow by design. It excludes both the early-stage bottom-fishing candidates and the late-stage already-broken leaders.

Layer Four — Relative Strength

Criterion 8: Relative strength rank of at least 70

The first seven criteria are all absolute — they describe the stock's configuration relative only to itself. Criterion eight introduces the market. William O'Neil's Relative Strength rank — and its modern equivalents — compare a stock's trailing twelve-month performance against every other stock in the universe, producing a percentile ranking from one to ninety-nine. A rank of seventy means the stock has outperformed seventy percent of its peers over the measurement window.

This filter is the one that most distinguishes Trend Template candidates from stocks that are merely participating in an index rally. In a broad advance, the absolute criteria will be satisfied by hundreds of stocks that are rising simply because the tide has come in. Criterion eight strips those away and retains only the stocks whose rise is differentially greater than the market's — the stocks that institutions are actively choosing, not passively owning.

The preference for RS ranks in the eighties and nineties reflects something deeper about how institutional capital flows. Leadership is narrow, not broad. In any given advance, a small subset of stocks accounts for the majority of aggregate outperformance. The tail of the RS distribution is not evenly populated — it is where institutional capital concentrates, and the concentration itself is the signal.

Running the Template — The Screening Pipeline

The template is computationally inexpensive, but order of operations still matters when running it across a universe of several thousand stocks. The most efficient pipeline applies the fastest-eliminating filters first, so that expensive computations are performed only on candidates that have already passed cheaper tests. For a typical liquid universe of roughly five thousand stocks, the cascade tends to collapse the set rapidly.

The first and most aggressive filter is liquidity. Before any Trend Template logic runs, the universe should be restricted to stocks meeting a minimum dollar-volume threshold — the common convention is an average daily dollar volume of at least five million, though individual desks calibrate this differently. Liquidity filtering typically removes roughly half of the raw universe.

The next filter is the moving-average stack itself — criteria one, four, and five applied jointly. Because these three are deterministic and fast to compute, applying them as a single compound test eliminates the vast majority of non-stage-two candidates in one pass. Criteria two and three — the relational and slope tests — are then applied to the survivors. The fifty-two-week range filters follow, and the relative strength rank is typically applied last, since RS requires a full cross-sectional calculation across the entire universe and is the most expensive to recompute.

What emerges from this cascade is not a trade list. It is a candidate pool — the set of stocks whose structural configuration is consistent with stage two. Within this pool, further pattern-recognition work is required to identify stocks actually forming high-probability bases and contraction setups. The Trend Template is the sieve that produces raw material; the pattern work is what turns raw material into actionable ideas.

The Pass Rate as a Market Regime Indicator

Here is where most traders stop. They run the screen, take the survivors, and move on to chart analysis. What they miss is that the count of survivors itself — the pass rate across a stable universe — is one of the cleanest regime indicators available. It is also conceptually distinct from traditional breadth measures because it is both multi-factor and structurally meaningful.

Because the template combines price-position, trend-slope, range-position, and relative-strength tests, its pass rate is not a simple proxy for any one breadth measure. It is tighter than "percent of stocks above the two-hundred-day" because it requires the full stack, the slope, the range, and the relative-strength ranking simultaneously. Historically, the distribution of this pass rate across market regimes has been remarkably well-behaved.

These bands are approximate and regime-dependent — pass rates vary with universe construction, with the specific RS threshold chosen, and with secular market conditions. The important observation is not the absolute level but the trajectory. A pass rate rising from four percent to nine percent over six weeks is a far more significant signal than the level itself — it reflects leadership broadening, institutional capital deploying, and the set of available high-probability setups expanding.

Conversely, a pass rate falling from twelve percent to four percent even while the index remains near its highs is a classic narrowing signal. The headline index may be making new highs, but the structural breadth beneath it is collapsing. This is the pattern that historically precedes many significant corrections: the averages hold up, disguised by a handful of mega-cap leaders, while the universe of genuinely stage-two stocks thins out beneath the surface.

What the Template Actually Screens

Step back from the eight criteria and ask what the template, considered holistically, is actually measuring. It is not identifying "good stocks." It is not identifying "stocks that will go up." It is identifying a very specific joint condition: stocks in which institutional-grade capital has already been deployed, the deployment is ongoing, the stock has cleared its early-stage structural risks, and it is differentially outperforming its peers. That is a remarkably tight specification.

The stocks that satisfy it at any given moment are, definitionally, the stocks in which the structural preconditions for a continued advance have been met. Whether any given stock among them actually continues to advance is a separate question — one that depends on pattern setup, entry timing, risk management, and the continuation of favorable market conditions. But the universe of stocks in which a continued advance is structurally possible is, at any given moment, the universe of Trend Template pass stocks.

This is why the template is upstream of everything else. Pattern recognition, pivot identification, volatility contraction analysis, and entry timing are all meaningful only when applied to stocks that have already satisfied the structural preconditions. Applied to stocks outside the Trend Template universe, the same pattern work produces dramatically worse outcomes, because the underlying supply-demand configuration is different.

The Broader Principle

The Trend Template teaches a discipline that applies beyond its own specification: configuration precedes catalyst. In markets, the common retail failure mode is to chase news — an earnings beat, a product announcement, a macro headline — into a stock whose structure has not yet confirmed stage two. The same catalyst applied to a stock already satisfying the eight criteria produces a fundamentally different outcome than it does applied to a stock in stage one, three, or four. The catalyst is the spark. The structure is the fuel. Sparks without fuel produce brief flashes; sparks with fuel produce sustained fires.

The deeper lesson is that the template formalizes a form of patience that most traders struggle to impose on themselves. It does not ask what might happen. It asks what has already happened. It refuses to anticipate stage two until stage two has structurally begun. That refusal, applied consistently over hundreds of trades, produces the statistical edge that separates durable momentum traders from those who are merely riding narrative.