The basic premise of trading momentum stocks is that strength begets strength. A stock that is performing well and showing signs of accumulation is likely to outperform other stocks that are not.
Outperformance in bull markets leads to outsized gains, while outperformance in weak markets can be a sign that investors are using the shakier backdrop to buy shares at a discount (that’s the short version of why we include relative performance in our technical criteria).
Identifying those kinds of stocks is the bread and butter of our Cabot Momentum Trader advisory, so I wanted to walk through a recent winning trade in STMicroelectronics (STM) from earlier this year to show exactly how it’s done.
Of course, not every stock that shows promise will go on to double in two months, but in a market that’s sharply divided between winners and losers, it’s important to identify the stocks with that kind of potential.
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Chief Analyst Mike Cintolo notifies Cabot Momentum Trader subscribers of the 10 best-looking stocks on Monday of every week. Of those 10 picks, he also highlights a “Top Pick,” which is the most promising of the group.
Mike prioritizes stocks with compelling stories that the market has latched onto, solid fundamentals, and impressive technical strength.
The Monday issues also include a full list of every stock that’s currently being covered, as well as stocks that are being dropped from coverage because they either failed to break out or no longer meet Mike’s criteria.
Here’s how he described STMicroelectronics on April 6, 2026.
… for our Top Pick, we’re going with growth—STMicroelectronics (STM) is a chipmaker with its hands in many cookie jars, but it looks like it’s finally catching a hold of the AI bandwagon, which should drive margins higher. Shares broke out today.
STMicroelectronics (STM) ★ Top Pick ★
| Price | Buy Range | Loss Limit |
| 35 | 34-35.5 | 29.5-30.5 |
Why the Strength
Dutch chipmaker STMicroelectronics is primed to be a major beneficiary of the $700 billion capital expenditures AI hyperscalers have announced for 2026. STM’s products address many of the steps in running an AI data center such as converting power at the server and converting electronic signals to light for optical data transmission. Management believes it can sell $500 million of goods into AI data centers this year and more than $1 billion next, partially thanks to a recently announced multiyear deal with Amazon Web Services to develop advanced semiconductors in what STM says is a “multi-billion-dollar” commercial deal. The company is also developing high-efficiency chips on silicon alternatives including gallium nitride and silicon carbide that are better suited to handle the high heat generated by intense AI operations. STM is gearing up production of silicon photonics products to feed the AI market this year, opening a 300-millimeter wafer production plant in Crolles, France, part of $2 billion in spending it will do this year. Other partnerships should also lead to strong AI-focused products, including an agreement inked with Nvidia last year to develop a new 800-volt DC power architecture. While investors are focused on AI for growth, STMicro feeds a number of industries, with 84% of Q4 2025’s $3.3 billion sales coming in areas like automotive, personal electronics and industrial, which account for 38%, 26% and 20% of revenue, respectively. Those industries are mixed, with auto down 15% last year, personal electronics up 17% and industrial up 5%. But the enthusiasm for the stock is all about AI, which will be a growing piece of the pie from here. For Q1, ended March, STM probably will see revenue jump 20% to over $3 billion, generating earnings per share of $0.17. Full-year sales may be constrained by lack of capacity, with consensus expecting a 14% rise to $13.4 billion, though analysts see margins and earnings skyrocketing both this year and next.
Technical Analysis
STM was a big laggard over the past couple of years, with an ugly long-term decline into last April’s low, and even after an oversold recovery, shares didn’t make much progress for the next few months. But the action improved after the November low, with shares actually popping to marginal new highs in early February after its expanded deal with Amazon. And now, after hacking sideways for a few weeks, STM actually broke out today. Of course, breakouts often run into some wobbles in rough markets, but we’re OK with a small position here or (preferably) on dips.
| Market Cap | $30.0B | EPS $ Annual (Dec) | ||
| Forward P/E | 29 | FY 2024 | 1.66 | |
| Current P/E | 69 | FY 2025 | 0.18 | |
| Annual Revenue | $15.1B | FY 2060e | 1.17 | |
| Profit Margin | 17.1% | FY 2027e | 2.03 | |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($B) | (vs. yr-ago-qtr) | ($) | (vs. yr-ago-qtr) | |
| Latest qtr | 3.33 | 0% | 0.08 | -79% |
| One qtr ago | 3.19 | -2% | 0.29 | -22% |
| Two qtrs ago | 2.77 | -14% | 0.06 | -84% |
| Three qtrs ago | 2.52 | -27% | 0.07 | -87% |
Weekly Chart | Daily Chart |
As you can see, Mike lays out the bull thesis behind the stock, including company fundamentals and the technical picture.
The weekly and daily charts provide valuable context for how the stock has traded over the last year and show the upside breakouts as they happen.
STM was a stock that Mike was comfortable buying at the time it was shared with subscribers, but he’ll also recommend buying stocks on subsequent dips or even at higher prices that may signal an upside breakout.
Then, every Friday, subscribers receive Cabot Momentum Trader’s Movers & Shakers updates, which include stocks that have entered buy ranges, updated stops where appropriate, and recommendations to sell some or all of a position based on the latest price action.
As you can see in the chart below, STM broke out and then just kept running, so the next update came in June when it was time to take profits.
In the June 5 Movers & Shakers, here’s what Mike wrote about STM:
STMicroelectronics (STM) – nothing wrong with holding and trailing a stop, but after the latest gap, we’ll take our terrific two-month profit off the table.
That update categorized STM as a “Full Sell,” meaning it was time to part ways with the stock and take the profits.
Then, in the next Cabot Momentum Trader issue on Monday, June 8, STM was classified as a “Sell” for any subscribers who missed the Movers & Shakers update.
| Date | Stock | Symbol | Top Pick | Orig Buy Range | 6/8/26 |
| Sell | |||||
| 4/6/26 | STMicroelectronics | STM | ★ | 34-35.5 | 75 |
Of course, not every recommendation doubles in two months, but STM is a great example of how new stocks are introduced to subscribers, how Mike presents his case, and how he exits a trade when it works as intended.
And if you’re interested in seeing more from Cabot Momentum Trader, we’ve got a special offer available to new subscribers right now.
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