CANSLIM

Developed by William O'Neil of Investor's Business Daily, CANSLIM is a method of screening for stocks based on the following seven characteristics. It should be noted that typically, only 2% of the database will qualify as buy candidates using these screening applications. In addition, when the Market Edge "Market Posture" is bearish, there will not be any selections since the M part of the formula requires a favorable market environment.

In order to qualify as a CANSLIM stock the company must have the following characteristics:

C = Current Earnings: Quarterly earnings per share are up 15% or more.

A = Annual Earnings: One year earnings growth rate is greater that 24%.

N = New Highs: The stock is within 15% of making a new 52-week high and is breaking out of a period of consolidation.

S = Shares Outstanding: The number of shares outstanding is less than 50 million shares and there has been a recent increase in trading volume.

L = Leading Stocks: The company is a market leader reflected by a Relative Strength Value (RSV) of 80 or higher. A RSV of 80 means that the stock outperformed 80% of all other stocks in the data base during the past year.

I = Institutional Ownership: Institutional sponsorship should be between 10% and 40%.

M = Market Conditions: The Market Edge "Market Posture" should be Bullish. During periods when the posture is bearish, there will not be any selections.

Capital Expenditures

For industrial companies, this refers to the sum of additions at cost to property, plant & equipment and leaseholds, generally excluding amounts arising from acquisitions. For utilities, it represents the amounts spent on capital improvements to plant and funds for construction programs.

Cash and Equivalents

These include cash, accrued investment income and short term investments (except when classified as investments by the company).

Cash Flow

Cash flow is a corporation's net income plus depreciation, depletion and amortization, divided by shares used to calculate earnings per common share. For industrial companies, it refers to net income (before extraordinary items and discontinued operations, and after preferred dividends) plus depreciation, depletion and amortization.

Chaikin Oscillator

The Chaikin Oscillator integrates the effect of volume and price movement when determining Buy/Sell points. It uses the product of average price for a day's trading activity and volume. The underlying premise is that as the price of a stock moves up it is under accumulation and down when under distribution. The key is that the stock's daily volume must confirm the move to be valid. The Chaikin Oscillator creates a volume multiplier which increases during periods of accumulation (stock closes above its midpoint for the day) and decreases during periods of distribution (stock closes below its midpoint for the day). When all variables are taken into account, the Chaikin Oscillator has its highest values when price is increasing under heavy volume, conditions present during a healthy advance. The lowest values are generated during a price decrease under low volume.

Change

Price difference in stock from previous days close

Close (Daily Close)

Previous day's Closing Price of stock or index.

Commodity Channel Index (CCI)

CCI is a powerful technical tool that is used to identify stocks that are either at the top or bottom of their trading cycle. The CCI reflects the increase in volatility that typically occurs as a stock approaches either a Short-term top or bottom. As the mean price of a stock distances itself from its average mean price, the stock approaches an Overbought/Oversold area. CCI readings of -100 or less are regarded as Oversold (bullish) while readings of +100 and higher are considered to be an Overbought (bearish) condition. Once the CCI enters either of these regions, conditions exist for the Short-term trader to enter the market.

Common Equity

For banks, common equity includes common/capital surplus, undivided profits, reserve for contingencies and other capital reserves. For industrial companies, it is common stock plus capital surplus and retained earnings, less any difference between the carrying value and liquidating value of preferred stock. For insurance companies, it consists of common stock, additional paid in capital, net unrealized capital gains or losses on investments, retained earnings, less treasury stock at cost.

Common Shares Outstanding

Number of shares issued by a company of common stock.

Common stock represents an ownership interest in a corporation. This ownership stake gives stockholders the right to elect the board of directors, whose fiduciary duty is to oversee management's performance. By owning a share in a company, investors are entitled to any dividends declared by the board for common stock holders, and if management does a good job, any resulting appreciation in the market price of the stock.

C-Rate (Confidence Rating)

The Confidence Rating is a measurement of the strength or weakness of the stock based on the magnitude of the rate of change that occurred when the stock reversed from either a bullish or bearish posture. C-Rate should be used in conjunction with the Opinion to determine the degree of strength associated with the Long, Neutral or Avoid Opinion. C-Rates of +8 or higher, coupled with a Long Opinion, denotes a Strong Buy. Conversely, C-Rates of -4 or lower, when coupled with an Avoid Opinion, suggest a weak condition. C-Rates change in value as a stock moves closer to its projected target, eventually reaching zero.

Current Assets

Current assets are those assets expected to be realized in cash or used up in the production of revenue within one year. These include cash, stocks and bonds, accounts receivable, inventory, and prepaid expenses.

Current Liabilities

These generally include all debts/obligations falling due within one year, such as salaries, interest, and accounts payable.

Current Ratio

The current ratio is calculated by dividing current assets, including cash, accounts receivable and inventory, by current liabilities, including all short-term debt. It is a measure of liquidity.