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CANSLIM Framework

April 6, 2026#finance#investing

Reference framework from William O'Neil's ~ How to Make Money in Stocks

C -> Current Big or Accelerating Quarterly Earnings and Sales Per Share

  • EPS should be up by 25% to 50% over the same quarter in the previous year.
  • The best companies can show earnings growth of 100% to 500% or more.
  • Always exclude one-offs:
    • sales of land
    • gains from contract termination
    • temporary one-quarter gains
    • extraordinary income

A -> Annual Earnings Increases

  • Annual earnings growth should ideally be 25%, 50%, 100%, or more.
  • Focus on the rate of change in earnings growth across years.

N -> New

  • Newer companies
  • New products
  • New management
  • New highs from properly formed charts

Possible business triggers:

  • new product launch
  • geographical expansion
  • growth in the end-user industry
  • client mining, meaning more business from an existing client
  • market share increase
  • industry growth
  • new branch introduction
  • distribution expansion
  • acquisition
  • capex

S -> Supply and Demand

  • Look for strong volume demand at key points.
  • Watch supply versus demand carefully.

L -> Leader or Laggard

  • Is the stock the leader in its industry or a laggard?
  • Relative Strength of 70 means the stock is outperforming 70% of the market.
  • The best winners usually have RS in the 80-90 range.

Tools

  • MarketSmith India
  • You can check RS ratings there.
  • Growth 50 is useful for finding stocks with the best RS ratings.

I -> Institutional Sponsorship

  • Use Screener to check whether FII buying is increasing.
  • Idea: see whether smart money is entering.

M -> Market Direction

  • Identify whether the market is bullish or bearish.
  • Track the 10-week moving average.
  • Track broader indices:
    • Nifty Smallcap 250
    • Nifty 50
    • Nifty Midcap index
  • Use indicators like SMA.
  • Moving averages work well in trending markets, but not as well in downtrending or choppy markets.

When Researching and Analysing Businesses

  • Investor presentations
  • Concall transcripts
  • BSE announcements
  • Current quarterly earnings growth
  • Annual earnings growth

Sector and Group Strength

  • Sectors tend to do well together and factors move together.
  • Roughly half of a stock's movement can be driven by the strength of its industry group.

Always watch for:

  • a sector doing well together
  • a sector showing up on price-volume action screens
  • a subgroup hitting 52-week highs

Price and Volume Action

  • Price high + volume high -> strong bullish signal
  • Price high + volume low -> weakening trend
  • Price down + volume high -> strong weak trend
  • Price down + volume low -> weakening bearish trend

Charting

Chart Patterns

Cup and Handle

  • Cup formation can last 7-65 weeks.
  • The handle usually forms in about 1-2 weeks after the cup.

Other patterns

  • 3-week or 5-week tightening
  • cup or saucer

Exit Strategy

  • If the difference between stock price and moving average is around 70%, that may indicate euphoria, a peak, or a climax.
    • Example: stock price more than 70% above the 200 SMA.
  • All-time-high selling volume can be a warning sign.
  • If the 30-week EMA crosses the stock price, consider selling.

Screener

Quarterly results screen

Bull Cartel style query:

YOY Quarterly sales growth > 15
AND
YOY Quarterly Profit growth > 20
AND
Net profit latest quarter > 1
AND
Market Capitalization > 1000
AND
Market Capitalization < 10000
AND
Price to Earning < 30
AND
Promoter Holding > 45%
AND
Profit growth 3 years > 20%