The methodology at a glance
CAN SLIM is a seven-factor growth stock selection system combining fundamental quality (earnings, institutional ownership) with technical timing (price action, relative strength, market direction). O'Neil's most famous chart pattern — the Cup & Handle — represents the exact moment institutional accumulation ends and a major advance begins.
The Seven CAN SLIM Factors
- C — Current quarterly earnings growth (25% or more year-over-year)
- A — Annual earnings growth (25% or more over 3 years)
- N — New products, management, or price highs driving the stock
- S — Supply and demand (smaller float + high volume = institutional accumulation)
- L — Leader or laggard (RS Rating of 80 or higher, preferably 90+)
- I — Institutional sponsorship (quality fund ownership, increasing over time)
- M — Market direction (only act in confirmed market uptrends)
Who is William O'Neil
William J. O'Neil was a stockbroker, author, and entrepreneur who founded Investor's Business Daily in 1984 and developed one of the most influential stock selection methodologies of the 20th century. In his early 30s, O'Neil achieved extraordinary personal returns — reportedly growing his portfolio over 2,000% — and used the proceeds to buy a seat on the New York Stock Exchange, becoming one of the youngest people ever to do so at the time.
His contribution to trading methodology goes beyond his personal track record. O'Neil conducted an exhaustive study of every stock market superperformer from the 1880s through the 2000s, identifying their common characteristics before their biggest advances. The result was CAN SLIM. He also invented the Relative Strength (RS) Rating — a 1-to-99 ranking that measures a stock's price performance relative to all other stocks. Kasauti's RS Rating is built on this exact concept.
The Cup & Handle pattern
O'Neil's most famous contribution to chart analysis is the Cup & Handle — a bullish continuation pattern that appears in the strongest stocks before their biggest advances. The cup is a rounded correction of typically 12–30% depth, forming over several weeks to months. The handle is a shorter, shallower pullback that forms on the right side of the cup. The breakout above the handle's high, on volume, is the entry signal.
This pattern works because it represents institutional accumulation. The left side of the cup is selling pressure. The bottom is where sellers exhaust themselves. The right side is new buying interest lifting the stock back up. The handle is a final shakeout of weak holders before the breakout.
Key principle: Stocks with RS Ratings of 90+ dramatically outperform the market. The best stocks are already outperforming before their biggest moves. Strength begets strength.
How Kasauti connects to O'Neil
Kasauti computes RS Ratings daily for every NSE stock. While the full CAN SLIM system includes fundamental factors (C, A, I) beyond Kasauti's current scope, the technical factors — RS Rating (L), new highs (N), volume (S), and market direction (M) — are deeply embedded in the screener. The RS Leaders signal preset surfaces exactly the stocks O'Neil would focus on.
Kasauti Insight · Nuances for Indian markets
The Cup & Handle pattern appears reliably on NSE stocks, but with a specific Indian twist: the cup depth tends to be slightly shallower on NSE midcaps (typically 15–22%) compared to what O'Neil described for US stocks (12–30%), because Indian midcaps have been in a structural bull trend for most of the past decade and major corrections have been shorter and less severe.
For RS Ratings specifically, an RS 90+ filter on NSE stocks in a bull market will surface a different universe than the same filter in a correction. During a strong bull phase, RS 90+ will include many midcap and smallcap momentum names. During a correction or sideways market, RS 90+ shifts toward defensive sectors (FMCG, pharma, IT services) because those are the stocks holding up relative to the broader decline. This shift is itself useful market information — it tells you where institutional money is seeking safety versus aggression.