CANSLIM system is based on Fundamental Analysis of the Indian Stocks.Once you have selected your Indian stocks for trading you can use Technical Analysis to trade the selected stocks.
C= Current Quarterly Earnings .The current quarterly EPS is the higher the better.You should look for minimum increase in quarterly earnings of 18 to 20 % over the same quarterly period one year ago.
A=Annual Earnings Increase.Annual earnings increases look for significant growth.The companies showing a strong annual growth rate of 25% over the last three years.You should look for strict consistent year by year growth for screening the Indian Stocks.ROE The return on equity should be good.The net Income divided by shareholders equity is ROE.The ROE should be at least 17%.
N=New Products,New Management,New Highs.The stock needs a catalyst to start a strong price advance.This catalyst can be a new product or service, a new management team employed after a period of lackluster performance, or even a structural change in a company's industry- such as a new technology.
S=Supply and Demand.Stocks with a small or reasonable number of shares outstanding will,other things being equal, usually out perform older,large capitalization stocks.Stocks with a large percentage of ownership by top management are generally good prospects. Look for companies buying their own stocks in the open market.Look for companies with a lower debt-to-equity ratio and companies reducing their debt-to-equity ratios over the last few years.
L=Leader or Laggard.You should identify and buy rapidly growing companies that are market leaders in rapidly expanding industries.Buying among the best two or three stocks in the group.You will be compensated for any premium you pay for these leaders with significantly higher rates of return.
I= Institutional Sponsorship. The stock needs a few institutional sponsors.Ten institutional owners is suggested as a reasonable minimum number.
M= Market direction. The overall market direction.The trend of the overall market will have a tremendous impact on the performance of your portfolio.It is difficult to fight the trend, so it is important to determine if you are in a bull or bear market.
You select the best stocks from sectors you intend to trade using this screening method.Once you have selected the stock, we will look into the technical analysis for entering and exiting stocks at right times.