CANSLIM is the stock picking methodology advocated by William O'Neill through his books and his newspaper, Investors Business Daily. The method advocates combining company fundamentals with technical analysis through charts to watch stock price movements on high volume and follow-through buying. It is a method based on William O'Neil's own experience that has made him a very wealthy man and an authority on the subject of stock picking. However, is this method useful for every type of investor?

CANSLIM is essentially a growth stock picking methodology that also requires you to be adept at watching market validation of your thinking. In other words, the methodology encourages you to watch for solid earnings growth, revenue growth and so on, but also encourages the investor to check if the stock market is in a bull or bear market, and then to check the behavior of individual stocks themselves. Bull markets are great for growth stocks, but bear markets can be brutal - so it is important to know whether the overall trend is down or up. Individual stock behavior is important to watch as well as every stock builds a base and then launches a rally, then builds a new base, launches a new rally and so forth. Generally speaking, stocks do not build more than three or four bases as part of their bull run - thus when a stock has already built three bases and rallied, it is a good time to exit. However, some stocks do have a blow-off run at the very end where the maximum gains can be had - but there is no way of predicting that.

Some of the issues with CANSLIM are:

1. It is trade intensive - many stocks that may have set up perfectly and launched with a beautiful chart formation on high volume may however drop back into their base, forcing you to sell as per the methodology. You must be ready to sell in a disciplined fashion, and to do so frequently.
2. It is time intensive - following chart behavior for stocks you have bought into, or those that are on your candidate list is a full-time job and will consume considerable time and effort.
3. Predicting overall bull and bear markets is not easy. The methodology advocated is that of allowing a 2%+ rise on high volume followed by a similar follow-through day. This is by no means fool proof, and one has to develop a "sense" of the market to know whether you are in a bull or bear market.
4. There is no bear market money-making strategy or methodology in place. It is recommended that you simply sit bear markets out - which may or may not be the best plan.

However, if you are willing to devote the needed time and attention, then newspapers such as IBD provide a lot of support and stock ideas to get you started. Following the methodology carefully, and being ready to trade frequently and letting your winners ride, you can make substantially money following this style of investing!