Keep it simple.
Building a winning portfolio is complicated enough. But some of you probably are barraged with all sorts of technical indicators and signals: stochastics (fast and slow), oscillators, MACD, Bollinger Bands... the list is endless.
Some technicians rely on these gauges, and have built solid track records by knowing how, or when, to use them. But the CAN SLIM model ignores these technical tools. Indeed, the conclusions you come to with stochastics and MACDs are often at odds with CAN SLIM.
Things get even more confusing when you apply these indicators to intraday charts.
You're probably tempted to fine-tune your purchase to jibe with a turn in the hourly stochastics.
Forget it. Even the professional traders who use those sophisticated technical gauges with success will tell you they're useless when a stock is breaking out.
Consider the CAN SLIM approach start with a great stock: Its earnings and sales are growing fast. Annual profit has been improving for at least the past five years in a row. Margins are wide and getting wider.
The company has a new idea or product that's changing its industry, or the way we live. Like Apple (AAPL), with its slate of iProducts. Or Costco Wholesale (COST), where some smart people thought Americans would gladly buy in bulk at a warehouse-style store to get rock-bottom prices.
How does a breakout occur? Big-money institutions have discovered the stock. Its Accumulation-Distribution Rating is typically a C or better. Its Relative Price Strength Rating is over 80, hopefully over 90.
The RS line is poking into new high ground. Top-rated funds are building positions.
Buy the stock correctly, either within 5% of a base's buy point or add-on point, or on a rebound from the 10-week moving average. Finally, make sure the market is in a confirmed uptrend. Check The Big Picture and the Market Pulse.
That's a lot to check, right
Panera Bread (PNRA) offers a current example. The five-day fast stochastics indicator immediately pointed to an "overbought" condition as it broke out past a 164.10 buy point Sept. 12. But so far, it's acting the way a leader should.
Keep it simple.