CANSLIM Stock Selection with Price Bases and Factor Confirmation

Summary

This report outlines a CANSLIM-inspired stock-selection model adapted to China’s A-share market. It first identifies price bases, including cup-and-handle, double-bottom, and butterfly patterns, then combines these setups with fundamental and technical measures. Fundamentals include profit and revenue growth and return on equity; technical confirmation uses relative volume, relative price strength, and growth in institutional ownership. The model excludes the smallest fifth of stocks by market capitalization, filters the base-pattern universe by factor ranks, equally weights selected stocks, and halves overall exposure when the CSI 300 is below its annual moving average.

The document reports a historical backtest from January 2005 through December 2017, including returns, Sharpe ratio, maximum drawdown, and comparisons with two equity indices. It also says the number of holdings varied widely between selection periods. These are reported backtest results rather than evidence of live performance; the summary does not provide transaction-cost assumptions, detailed pattern definitions, or robustness checks, and the portfolio could hold no stocks in some periods.

Key ideas

• The model combines price-base patterns with fundamental growth and technical strength measures.
• It removes the smallest market-cap stocks before forming a universe of qualifying bases.
• Among base-pattern stocks, it ranks relative price strength, revenue growth, and institutional ownership growth.
• Selected stocks receive equal weights, while exposure is cut when the CSI 300 is below its annual moving average.
• The historical backtest reports strong returns alongside a substantial maximum drawdown and variable holdings.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.