By this measure, an investor using the CAN SLIM investing strategy could turn $10,000 into nearly $200,000 over 15 years. The problem with trendlines is that they can be imprecise, not always exactly touching highs or lows. The CAN SLIM method provides a bit more confirmation that the price is moving higher, but results in sometimes paying a slightly higher price than what is required. Add the newly created RS Rating Condition to your WatchList as shown below. If the price has already rallied more than 5% above the entry point, before you see it, wait for the next buying signal. Charts Candlestick, P&F. Please reload CAPTCHA. Hi! Everything needs to align in order to take a trade. N – New High Price, S – Supply/Demand While quarterly earnings growth covers the short-term potential, annual earnings growth gives one insight into the long-term potential. The CAN SLIM Select Growth Fund (CANGX) is a mutual fund that invests at least 80% of its net assets in stocks that fit the profile of stocks selected through the CAN SLIM system. One advantage of the trailing stop loss is that it removes subjectivity. This method was not promoted by O’Neil, but is the primary entry method discussed in the Stock Market Swing Trading Video Course, which has many features that align with the CAN SLIM method (while CAN SLIM is called an investing method, many of the trades end up being swing trades if using a daily chart). QoQ change is %): Basically, the exact criteria can be altered to suit individual preferences, and zero in on stocks that are exhibiting specific qualities and that are in a specific price area (relative to highs, for example). If the price has a weekly or daily close below the indicator line, move your stop loss to a couple cents below the low of that price bar. Premium Realtime & Alerts. We look to buy CAN SLIM stocks after they have consolidated, pulled back, or formed a basing pattern, and then enter when the price breaks to new highs, or breaks higher out of a consolidation close to the highs (such as a breakout from the “handle” of a cup and handle chart pattern). There are a number of patterns outlined in O’Neil’s book to look for; not all of them are shown on the chart. Lutey, Crum, and Rayome tested the strategy against the NASDAQ 100 and found that it outperformed in both the short term (3-5 years) and the longer-term. Contact Us support@chartink.com. The one thing to take note of here though, is to be skeptical of the financial reports that companies put out – businesses have a lot of incentive to fudge the numbers and you’ll need to really delve deep to understand whether the stated growth is real or artificially inflated. Since the goal of the strategy is to only be involved in the strongest of stocks, pullbacks, consolidations and basing patterns shouldn’t fall more than about 20% off the high before starting to move higher again. }, 21 I just compared today’s results to Market Smith. Finding the stocks is only part of the battle. This process allows us to ride the big price waves in momentum stocks. One must be aware, that while the back-tested CAN SLIM strategy destroyed the S&P 500 in a head to head battle, the CAN SLIM Select Growth Fund underperformed the market since its inception in 2006. The CAN SLIM TC2000 Relative Strength Scan gives an error: (((C–C63)/C63)*.4)+(((C–C126)/C126)*.2)+(((C–C189)/C189)*.2)+(((C–C252)/C252)*.2))*100. Click on the Plus Sign to the right of the column header and search for the newly created RS Rating condition. These back-tested statistics just help show that the method is viable. Written by: Jiva Kalan: A researcher and writer whose work is featured on DailyFinance, the Wall Street Survivor and Financial Choice. Funnel money from weak or losing positions (that you sell) into positions that are performing the best. The indicator is not intended for identifying entry points, only possible exits. It’s fairly easy for a company to conduct a one-time cost-cutting exercise that boosts quarterly growth but it’s harder to see that boost in growth over a long time frame, as measured by annual earnings. A breakout from a consolidation or basing pattern (discussed in Entry Points below) on increasing volume is a technical change that is likely to draw in more buying interest (and shows there is interest already there!). Instead, focus on cutting your losers and wait for the next uptrend. timeout Does the company have some sort of new product or service offering? display: none !important; If the S&P 500 has been dropping for a week, and the stock you are looking at is holding steady (and it fits all the other criteria discussed in this article) that is a very good sign. O’Neill breaks down market direction into three stages: Stocks tend to follow the market, with three out of four companies moving in the same direction as the market. In the end your scanner should look something like this. Some are held for 8 weeks. Login/Register Scans, Watchlists. Institutional sponsorship simply means that large funds in the financial industry are buyers of the company you are interested in. StockRover.com is a comprehensive stock screener and they have compiled screeners based on the CAN SLIM method for subscribers. Increasing volume of 40% or more on a breakout in price (discussed later) helps confirm there is demand. Rudolph Technologies (RTEC), another CAN SLIM stock (close to the criteria) at the time of writing, shows some different types of pullbacks and entry points. Just consider the case of Toshiba, a global brand that was caught perpetrating a billion dollar accounting scandal in 2015, inflating profits all the way back to 2008. Then, click the Charts button to see the recent price movements of the stocks. CAN SLIM is an acronym, one which came out of a study conducted by William O’Neill, on the best-performing stocks from the 1880s to 2008. Free Level 2 Indicators For The Stock Market, Use TweetDeck To Gauge Stock Market Sentiment. Often pullbacks will only drop 10% to 20% in very strong stocks. In addition to extremely strong quarterly earnings growth, keep your eye out for high sales growth of at least 25%. The ATR Stops (6,3) is a good place to start, but if you notice on historical data that the indicator resulted in poor exits, adjust it slightly so the indicator better fits the price data. The counter-argument is that the alternate method requires more finesse and analytical ability because we need to be able to see when the pullback has fizzled or when to hold off on taking a trade because it has more downside left. All Rights Reserved. Each of the stocks above scored an RS rating of 99. Approximate CAN SLIM entries are marked by the horizontal lines, while the alternate method entry points are the tops (breakouts) of the small boxes. INK CHART : CANSLIM. Stick to the strongest stocks and only taking valid signals in stocks that align with the strategy criteria (or a close variation of it). That said, there is always another entry point somewhere, so even if we do get stopped out at an inopportune time, usually we will be able to get back in and not miss much of the action. Traders with small accounts can use utilize all their capital in 1 or 2 of their best stock picks. Stocks that don’t perform well can be sold (discussed below) and that capital can be used to pyramid into the stocks that are performing well. If a stock is entered and it continues to move favorably after entry, buy more (but fewer shares than you originally purchased). You want to make bets on companies with solid growth and a viable business model, while at the same time being sensitive to price movements and the actions of other investors in the market. C – Current Earnings (Up) What someone sets their earnings threshold at will affect which stocks are approved for trading. If it continues to drop, you will be stopped out. Investors should buy companies that are the leader in their industry or sector, in terms or price performance. Ultimately though, if a stock is moving very strongly and everything lines up for a good trade, then the number of shares outstanding isn’t a major concern. Alerts, Scan The goal is to enter as the price is moving up as soon as there is enough confirmation to do so. Enter soon, and never chase the price. A buy entry is taken right as the price moves above the prior high price (high price before the pullback or basing pattern) or as it breaks higher out of the consolidation within the pullback. This chart view is an easy way to scan through lots of stocks in a short amount of time. M – Market Direction. The William O'Neil CAN-SLIM-esque strategy is a growth investing strategy inspired by a proprietary model devised and owned by US investor and publisher William O'Neill. Save my name, email, and website in this browser for the next time I comment. Strong traders who dedicate time to the method could well see returns in excess of 40% per year, while those who implement the strategy in a sloppy fashion could very well lose money. O’Neill suggests identifying leaders through relative price performance. The CAN SLIM acronym highlights where to look for opportunities. Continue to decrease the number of shares bought at higher prices though, as this keeps the cost base for the trade low. Stop losses need to be manually adjusted based on the indicator reading/level. Mainly, sticking to very strong trending stocks will tend to produce the best results for most people. Not only is it a good sign when hedge funds, pension funds, and stock market legends are increasing ownership of the company but it’s even better when those players are ones who have a strong track record of outperforming the market. If you buy late, you have given up too much profit potential already. I´m wondering, if any of you know for a free stock screener, which can be adjusted to meet CANSLIM criteria? It doesn’t address how to exit or enter trades. As a general rule, the best performing companies over the last 100+ years have had P/E ratios well above the average P/E of the S&P 500. Using the same method on a weekly chart is much less prone to being stopped out during a major rally, and therefore is better for longer-term trades. Backtesting considers values as per completed candles of the timeframes, this may cause the results to change for the latest candle/time as its candle is being built. 50% quarterly earnings growth looks good in isolation but what if the company you are looking at is actually at the bottom of the pile in an industry that is just taking off? When the price broke above it in November it signaled the start of the next advance, and provided an entry slightly lower than the CAN SLIM method. By sharing trading ideas we all become better, together. Terms of usage | Privacy Policy | About Us | Contact Us. We have a drop, followed by a small rally and then another drop. We don’t’ need to hold these stocks forever (exit rules will be discussed later), we just need to hold them while everyone loves them and is clamoring to get a piece of the action. × Great companies with innovative products can continue going higher. The numbers have been altered slightly on each of these screens, and end up producing very different results. In other words, when the market is declining it’s going to be harder to pick a winner. Interestingly, taking profits at about 20% to 25% would have worked out very similar to the trailing stop loss method. This is why it takes time to scan through stocks; we need to find the best trade candidates, not just the first trade setup that comes along. CANSLIM Stock Screener ( with free tools ) CANSLIM method is developed my William O'Neil. This scan is great for finding stocks on the rise. This strategy crushed the S&P500, which returned 4.2% in the same period. Nor it is necessarily an endorsement of the Turtle Trader strategy. After a strong stock breaks out from a basing pattern, it will often run 20% to 25% before a significant correction. function() { Please reload CAPTCHA. ((((C – C63) / C63) * .4) + (((C – C126) / C126) * .2) + (((C – C189) / C189) * .2) + (((C – C252) / C252) * .2)) * 100. Start by creating a New > Condition (PCF) Formula. In order to determine when to hold or sell a stock, according to Mr. O’Neil guidelines, you would need to study his book in detail.
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