William O’Neil’s CAN SLIM Strategy: Setting Buy and Stop-Loss Rules for Korean Stocks Using EPS, Relative Strength, and Volume
William O’Neil’s CAN SLIM is a growth-stock trading strategy that identifies companies with growing earnings and market-leading stocks, buys on breakouts accompanied by strong trading volume, and limits losses to 7~8% below the purchase price. When applying it to Korean stocks, investors should look beyond EPS growth and also assess the direction of the KOSPI and KOSDAQ markets, relative strength within the industry, institutional trading activity, and liquidity.
Looking at the application principles as of 2026-10-30, the most important point is to separate the criteria for selecting stocks from the conditions for actually buying them. A company with strong earnings is not automatically a buy. You must also confirm that the broader market is supportive and that the stock price breaks through an appropriate buy point.
What Kind of Stocks Does CAN SLIM Aim to Identify?
CAN SLIM is a growth-stock selection and trading system developed by William O’Neil, founder of Investor’s Business Daily (IBD) in the United States.
The system identifies common financial and technical characteristics among historical stock market winners in the United States, using both corporate growth and the supply-and-demand conditions reflected in stock prices. Unlike a strategy of simply buying undervalued stocks and waiting, it focuses on companies that have already demonstrated strength in both their earnings and share prices.
The seven letters in CAN SLIM stand for the following:
| Category | Meaning | What to Check in Practice |
|---|---|---|
| C | Current Earnings | Recent quarterly EPS growth |
| A | Annual Earnings | Consistency of annual EPS growth |
| N | New | New products, businesses, or price highs |
| S | Supply and Demand | Shares outstanding and trading volume |
| L | Leader | Price strength relative to the market and industry |
| I | Institutional Sponsorship | Institutional ownership and buying activity |
| M | Market Direction | Overall market direction |
Among these factors, Korean retail investors should initially focus on C, A, S, L, and M.
However, ignoring I and N would mean missing essential parts of CAN SLIM. Growth drivers from new businesses and institutional trading activity help explain the factors behind rising earnings and stock prices.
The CAN SLIM analysis of William O’Neil published by AAII in 2016 explains the meaning of all seven factors and their practical screening criteria, based on the fourth edition.
How Should EPS Be Compared When Analyzing Korean Stocks?
When evaluating C and A in CAN SLIM, investors should look beyond current-quarter EPS and examine both year-over-year growth and the annual earnings trend over multiple years.
C: Recent Quarterly EPS Growth
Quarterly EPS growth is calculated as follows:
EPS Growth Rate = (Recent Quarter EPS − EPS for the Same Quarter Last Year) ÷ EPS for the Same Quarter Last Year × 100\text{EPS Growth Rate}=
\frac{\text{Recent Quarter EPS}-\text{EPS for the Same Quarter Last Year}}
{\text{EPS for the Same Quarter Last Year}}\times100Assume, for example, that a company has the following figures.
Hypothetical Example: Changes in Company A’s Quarterly EPS
EPS for the Same Quarter Last Year
KRW 800
Recent Quarterly EPS
KRW 1,040
Author’s Calculation
1,040−800800×100=30%\frac{1,040-800}{800}\times100
=30\%# EPS increase of 30%
This example shows an increase of 30% in earnings per share compared with the same quarter of the previous year.
This figure alone should not determine whether to buy the stock.
The following factors should also be checked:
Have EPS growth rates slowed over the most recent 2 quarters?
Is revenue growing as well?
Has net income increased because of one-time gains?
Are operating income and operating cash flow also supporting the growth?
Was EPS in the same quarter of the previous year unusually low, distorting the growth rate?
In particular, the conventional growth-rate calculation can be misleading for companies that have moved from a loss to a profit. In such cases, rather than simply comparing growth-rate figures, examine the sustainability of the return to profitability and the trends in revenue and operating income separately.
A: Is Annual EPS Growing Consistently?
A stands for Annual Earnings Increases.
A company should not be classified as a growth stock simply because it reported strong earnings in one quarter. Examine how its annual EPS has changed over the past 3~5 years.
In practice, check the following:
1. Has EPS increased consecutively over the most recent 3 fiscal years?
2. Has the annual EPS growth rate remained relatively consistent?
3. Have revenue and operating income also increased over the long term?
4. Is earnings growth independent of any particular one-time event?
AAII’s explanation of O’Neil’s fourth edition identifies EPS growth over the most recent 3 fiscal years and annual growth rates of at least 25% as key screening criteria.
However, 25% should not be treated as an absolute rule that applies to every company. Specific numerical thresholds may vary depending on the edition and the purpose of the analysis.
Where Can You Find EPS Data for Korean Companies?
It is best to check corporate financial information through the Financial Supervisory Service’s Data Analysis, Retrieval and Transfer System (DART).
Search for the company in the Financial Supervisory Service’s DART electronic disclosure system and review its quarterly, semiannual, and annual reports.
In particular, make sure to use consistent definitions for the following three items.
Whether the figures are based on consolidated or separate financial statements
Whether the figure is basic EPS or diluted earnings per share
Whether the figure represents the standalone quarter or a cumulative period
DART’s financial information inquiry service provides financial statements and key financial information included in periodic reports. However, do not make decisions based solely on figures displayed on the inquiry screen; cross-check them against the original reports.
Finding Korea’s True Market Leaders Through Relative Strength (RS)
In CAN SLIM, L stands for Leader or Laggard, a criterion for distinguishing stocks that lead the market from those that fall behind.
Here, Relative Strength refers to how strongly a stock has performed compared with other stocks in the market over a given period. It is a different indicator from the Relative Strength Index (RSI).
How Is Relative Strength Calculated?
When applying this approach to Korean stocks, you can compare stock returns over a specified period for companies listed on the KOSPI and KOSDAQ markets.
For example, the calculation can be performed as follows.
Period return = (Current stock price / Stock price at the beginning of the period − 1) × 100
\left(\frac{\text{Current stock price}}{\text{Stock price at the beginning of the period}}-1\right)
\times100Assume, hypothetically, that the following results were recorded over 6 months.
| Comparison | 6-month return |
|---|---|
| Company A | +42% |
| Company B | +18% |
| KOSPI | +12% |
| Company C | -5% |
In this example, Company A demonstrates stronger performance than both the market and the comparison companies.
However, to compare relative strength accurately, the following conditions must be standardized.
The same evaluation period
The same market or a comparable group of stocks
Consistent price-adjustment rules for dividends, stock splits, and similar events
How newly listed and suspended stocks are handled
Stock price trends by industry
In actual portfolio management, you can compare returns over 3 months, 6 months, and 12 months separately to determine whether the strength is temporary and limited to a single period.
How Should You Interpret Relative Strength Rankings?
IBD’s Relative Strength Rating is an indicator that expresses a stock’s price performance relative to other stocks as a percentile ranking.
According to the criteria attributed to O’Neil and explained by AAII, investors are encouraged to prioritize stocks with an RS of 80 or higher and generally avoid those below 70.
Relative strength indicators or proprietary stock-screening scores provided by Korean securities brokerage apps should not be assumed to be equivalent to IBD’s official RS Rating.
Therefore, a reasonable way to interpret relative strength rankings calculated directly for Korean stocks is as follows.
Top 20%: Potential market leaders
Top 30%: Candidates for further monitoring
Middle and lower ranks: Relatively weaker stocks
The percentile ranges above are practical classification examples for applying the concept to Korean stocks. They are not official IBD ratings or verified buy criteria.
The important point is not simply to find stocks whose prices have risen significantly.
Instead, check whether a stock declines less than the broader market during a correction or recovers ahead of the market when it rebounds.
How to Narrow Down Buy Timing Using Trading Volume
S stands for Supply and Demand.
CAN SLIM examines not only a company's total and publicly traded share counts but also whether trading volume increases as its stock price rises. Even if a company has strong earnings, a breakout is difficult to regard as highly reliable if sufficient buying demand does not emerge when the stock price moves above resistance.
Compare Trading Volume With the 50-Day Average
The simplest approach is to compare the day's trading volume with the average trading volume over the most recent 50 trading days.
Trading volume multiple = Today's trading volume / Average trading volume over the most recent 50 days
\frac{\text{Today's trading volume}}
{\text{Average trading volume over the most recent 50 days}}Let's look at a hypothetical example.
| Category | Trading volume |
|---|---|
| Average over the most recent 50 days | 100 ten thousand shares |
| Breakout day | 180 ten thousand shares |
| Trading volume multiple | 1.8 times |
According to the author's calculation, trading volume on the breakout day is 80% higher than the average.
If the stock price also moves above resistance, this provides a positive confirmation signal because trading volume and price are moving in the same direction.
Conversely, exercise caution in the following situations.
Trading volume increases, but the closing price fails to rise
The stock reaches an intraday high but then retreats sharply by the close
Trading volume surges only after the stock price has already risen substantially
Cases where prices surge on a small number of orders in stocks with low trading volume
High trading volume alone does not prove that institutional investors are buying. Volume reflects executed buy and sell transactions, so price movements, closing-price positioning, and investor-specific trading data should all be examined together.
Trading Value Also Matters in the Korean Stock Market
Applying the same trading-volume thresholds used in the U.S. market directly to Korean stocks can result in excessive screening of low-liquidity stocks.
For example, trading 100 shares of a stock priced at KRW 1,000 and trading 100 shares of a stock priced at KRW 100,000 represent substantially different trading values.
Therefore, when investing in Korean stocks, it is advisable to examine trading value alongside trading volume.
Trading Value ≈ Stock Price × Trading Volume\text{Trading Value} \approx
\text{Stock Price}\times\text{Trading Volume}Stocks with a small number of shares outstanding can experience significant price movements even on relatively low trading volume. Investors should therefore consider not only the ability to buy shares but also whether they can execute a sale when needed.
Actual CAN SLIM Buy Decisions Are Made at Chart-Based Entry Points
Finding a stock with strong earnings and relative strength does not mean buying it immediately. The next step is to check whether the stock breaks through resistance after undergoing a period of correction and consolidation.
O'Neil described these price correction and consolidation areas as a Base.
The main patterns include the following:
Cup with Handle
After rising, the stock undergoes a correction that forms a rounded cup shape, followed by a small consolidation area resembling a handle. A breakout above the handle's upper boundary becomes the buy pivot point.
Double Bottom
A W-shaped pattern that forms two lows. The point where the stock moves above the intervening rebound high is used as the buy pivot point.
Flat Base
A consolidation within a relatively narrow price range.
※ This article is for informational purposes to help readers understand market trends and does not constitute a recommendation to invest in any specific stock or asset. All final investment decisions and responsibility rest with the individual investor.