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CANSLIM was developed by William O'Neil, the head of an investment research organization who spotted a set of common features attached to growth stocks. As a medium/long term system, it is of limited use to day trading traders. The acronym stands for:- Current quarterly earnings per share / Annual earnings growth / New products, New Management, New Highs / Shares outstanding / Leading industry / Institutional sponsorship / Market direction. The basic rules are as follows:- Current Quarterly Earnings - Earnings per share (EPS) up 20% or more compared to the same quarter for last year; Annual Earnings Growth - 5 year EPS must be increasing by at least 15% per year; New Products, New Management, New Highs - look for a new product or service, new management, or technology that will boost the price; Shares Outstanding - less than 25 million (simple supply and demand!); Leading Industry - look for clear leadership status in its sector; Institutional Sponsorship - if a stock has at least 3 institutional sponsors, but less than 10, its a good sign; Market Direction - MOST Important:- always follow the general market trend (under the assumption that 'a rising tide lifts all boats'). |
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