CANSLIM: Through the Lens of a Technical Analyst

Combining these two approaches has enabled me to make more confident, informed investment decisions

"Success in investing doesn't correlate with I.Q. once you're above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing." - Warren Buffett

This timeless advice from Warren Buffett highlights the essence of successful investing—it's not just about intelligence, it's about temperament and strategy. One such strategy that embodies this philosophy is CANSLIM, a holistic approach that combines fundamental knowledge with technical precision to provide investors with a nuanced understanding of the stock market.

For me, adopting CANSLIM was like acquiring a new set of lenses through which to observe the market. All the factors in the acronym: Current Revenue, Annual Revenue, New Products or Services, Supply and Demand, Leaders and Laggards, Institutional Ownership, and Market Direction—are guiding principles in the intricate process of making investment decisions.

Unlike traditional technical analysis solutions, which often focus solely on price action and chart patterns, CANSLIM delves deeper, considering both quantitative metrics and qualitative aspects of a company's performance. It's akin to shifting perspective from ground level to reveal a stock's true value and potential.

In my experience, integrating fundamental and technical analysis with CANSLIM has proven invaluable. While technical indicators can illuminate short-term trends, fundamentals such as revenue growth and market demand establish the groundwork for long-term success. Combining these two approaches has enabled me to make more confident, informed investment decisions.

Looking ahead, I anticipate CANSLIM continuing to evolve with technological advancements. With increasingly sophisticated tools and data analytics, investors can refine their strategies and uncover hidden opportunities in the market more effectively.

Ultimately, CANSLIM is not merely a strategy—it's a mindset, an investment mindset that underscores thorough analysis and disciplined decision-making. By embracing this holistic approach, investors can navigate market fluctuations with clarity, confidence, and ultimately achieve their financial objectives.

Key CANSLIM investing criteria:

- Stocks within 15% of its 52-week high and are breaking out of a period of consolidation.

- Five-year average compounded earnings growth rate is greater than 24 per cent.

- Market correction (M) should be considered.

- Return on Capital Employed (ROCE) is greater than 25 per cent.

Authored by: Mohammed Arham Yusuf

Disclaimer: The article is for informational purposes only and not investment advice