CAN SLIM is Investor Business Daily's (IBD) acronym for the seven common characteristics all great performing stocks have before they make their biggest gains.
C= Current earnings per share should be up 25% or more and in many cases accelerating in recent quarters. Quarterly sales should also be up 25% or more or accelerating over prior quarters.
A= Annual earnings should be up 25% or more in each of the last three years. Annual return on equity should be 17% or more.
N= A company should have a new product or service that's fueling earnings growth. The stock should be emerging from a proper chart pattern and about to make a new high in price.
S= Supply and demand. Shares outstanding can be large or small, but trading volume should be big as the stock price increases.
L= Leader or laggard? Buy the leading stock in a leading industry. A stock's Relative Price Strength Rating should be 80 or higher.
I= Institutional sponsorship should be increasing. Invest in stocks showing increasing ownership by mutual funds in recent quarters. IBD's Accumulation/Distribution Rating gauges mutual fund activity in a stock.
M= The market indexes, the Dow, S&P 500 and Nasdaq, should be in a confirmed up trend since three out of four stocks follow the market's overall trend