The CAN SLIM Investing System was created by William J. O’Neil after his study of the biggest winning stocks in the history of the stock market going back 130 years. He wanted to systematically quantify the the traits both fundamentally and technically that was the difference between the stocks that created the Alpha in the stock market over the long term versus all the ordinary stocks. He looked for the signals they give in the first stages of their big up trends. Also, just as importantly identify when their trends come to an end after running out of momentum and what are the key sell signals they show when the time has come to lock in profits while they are still there.
The CAN SLIM Investing System for stocks brings together both fundamental measurements of a company’s strength of earnings and sales along with its growth rate and combines it with a technical trend filters for its chart and he overall market direction. It also considers the specific re-occurring patterns of the biggest stock winners in history like innovative products or business models along with good management.
A CAN SLIM fundamental filter is a great place to start if you are looking to build a watch of stocks to trend trade that will have a built in bullish bias as they are accumulated by investors and funds. They are stocks that will be safer to buy a price dip on or let a winner run.
Here are the seven dynamics of stocks that will fit the CAN SLIM filter:
Current Quarterly Earnings
Earnings Growth is an important factor to look at when buying stocks. Look for stocks with increases in current quarterly earnings of at least 25%.
Annual Earnings Growth
In addition to quarterly earnings you want to make sure companies are showing strong long term growth. Look for stocks that have grown their earnings at least 25% or more for the past 3 years.
New Product, Service, Management or Price High
Studies of the great stock market winners of the past all had something NEW. Always look for companies with new, game-changing products and services.
Supply and Demand
S is for Supply and Demand. As more investors demand a limited supply of shares, a stock’s price goes up. Look for heavy-volume accumulation by institutional investors, particularly at buy points.
Leader or Laggard
We are always looking to buy leading stocks in leading industry groups. Look for the best of the best – the leaders in strong industries that are showing superior earnings growth and sales.
Professional investors, like mutual funds and pension funds, account for about 75% of all market activity. Learn how to follow the big money.
The Investor’s Business Daily CAN SLIM study shows 3 out of 4 stocks follow the market’s trend, so you always want to trade in sync with the market. Be aware of the stock market’s current trend direction.
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