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Beginners in Stock Trading
Issue №62 · ~7 min read
Weekend Recap: M2-to-M3 transition
Day 62. Two pillars completed (M1 Foundation, M2 CAN SLIM Part 1). Three CAN SLIM letters in your toolkit (C, A, N), now shown working together as one screen. This week also opened the technical side of the framework with the S.
A NOTE ON WHERE WE ARE
Real talk on delivery: this week, Monday through Friday, never went out as evening sends. You're getting all five days here, at once, instead of spread across the week. It's the same gap that hit the A and the N earlier this summer, now hitting the integration week and the M2-to-M3 handoff.
Practical milestone: sixty-one lessons now exist in draft, and as of this week you have more than three separate letters, you have them working together as a single screen with a clear decision rule for each outcome. That screen, below, is the actual output of two full months of methodology work. If you only take one thing from this recap, take the screen and start running it on your own watchlist.
THE WEEK IN ONE PARAGRAPH
None of this reached you Monday through Friday. Here it is in full, day by day:
Monday, the three letters as one screen. C, A, and N were taught separately across M2 so each could land cleanly, but real application runs them together, asking one question of every stock: does it pass C and A and N right now? A full pass (all three) puts a stock in the top 10-40 names per quarter out of a 4,000-5,000 stock universe, the actual CAN SLIM watchlist. A partial pass (two of three) splits into three distinct cases: C+A with no N is a watchlist stock waiting on a catalyst; C+N with no A is the highest-risk case, often a one-quarter fluke; A+N with no C is a possible trend change worth investigating, not skipping outright. Anything less than two letters, move on.
Tuesday, Trader Tuesday: Lance Breitstein, his first feature here. Trillium's all-time top trader, $100M+ verified profits across a 10+ year career, soon featured in Schwager's Market Wizards: The Next Generation. His peak P&L years were 2020 to 2021, the same QE-era window this newsletter flags honestly whenever it comes up, but his multi-year Trillium record and the Schwager selection are vetting that goes well beyond those two years alone. His operating principle: the cleanest setup wins. A simple setup has clear fundamentals, an unambiguous chart pattern, textbook volume, a supportive broader market, and obvious position sizing, all five aligned, nothing to think about, just execute. A worked example walked through a stock with 38% accelerating quarterly EPS growth, a 31/27/35 three-year growth trend with expanding ROE, and a new high off an earnings-beat catalyst: a full pass on C+A+N, a clean six-week base with a breakout day 75% above average volume, an obvious 8% stop below the base low. Fifteen to twenty minutes of work, because the setup did the deciding.
Wednesday, what to do with the other 90%. Most stocks you'll ever look at pass two of the three letters, not all three, because the full-pass universe is roughly a tenth the size of the partial-pass universe. This is where beginners over-trade: two strong letters feel like enough, and the third gets rationalized away. The discipline is the opposite. C+A with no N usually means the chart isn't ready, wait for the catalyst. C+N with no A is usually a one-time event dressed up as a trend, skip it unless you can name a specific reason the business itself is inflecting. A+N with no C is the case that deserves real investigation: figure out whether the weak recent quarter is one-time noise or the first sign the multi-year story is ending.
Thursday, Month 2 closed. A consolidated pass through C, A, and N: the 25%+ current-quarter standard and why it was empirically derived rather than guessed at, the 25/25/25 three-year-plus-ROE standard, and the new-highs-with-a-catalyst standard built on Pradeep Bonde's four catalyst categories. Four names anchored the two months: O'Neil (the architecture and the empirical origin of the 25% threshold), David Ryan (the three-time champion who ran 25/25/25 at the highest level), Bonde (the catalyst-driven framing of the N), and Breitstein (the discipline to act only on full passes).
Friday, the S opened. Price tells you what happened; volume tells you who participated. Heavy volume on up-days is accumulation, heavy volume on down-days is distribution, light volume on either means not enough participation to conclude anything. Supply has three structural sources: float size (smaller floats move further on the same buying), insider holdings (selling programs expand effective supply, quiet insiders shrink it), and share issuance (secondaries and heavy stock-based comp create persistent overhead supply). Demand has three sources too: institutional accumulation (the largest by dollar volume), narrative-driven retail interest (smaller but can concentrate fast), and index inclusion or ETF flows (mechanical but real). A stock with clean supply and multiple demand sources has structurally favorable conditions before you even look at the chart pattern.
THE ONE THING TO HOLD FROM THIS WEEK
If you remember nothing else: the cleanest setup wins, and cleanest means all three letters plus a clear chart, not two letters and a story.
The instinct, especially early on, is to find reasons a partial pass is close enough. Breitstein's framing this week is the corrective: when everything aligns (fundamentals, chart, volume, market, sizing), there's nothing to decide, you just execute. When something doesn't align, that's not a puzzle to solve cleverly, it's a signal to wait. Across many decisions, waiting for the clean setup beats being clever about the marginal ones, and it's a discipline you can start applying to whatever's on your watchlist right now, even before you've learned the remaining four letters.
Friday's S adds the mechanism underneath that discipline: a clean chart matters because it's showing you the supply-demand balance in visible form. Learning to read the volume bars with the same attention you give the price bars is the single highest-leverage chart-reading skill from here forward.
WHAT M3 W1 WILL ADD
Five lessons still ahead this week, the S deep dive continues:
Monday (Day 64): Float, why size matters. Why smaller-float stocks move further on the same dollar volume, and the float cutoffs (small, mid, large, mega) that adjust the methodology's thresholds.
Tuesday (Day 65): Volume as proof of demand. Trader Tuesday: William O'Neil, supply/demand origin. His fifth feature, distinct from the prior four, on how his research into float, accumulation, and distribution produced the S framework.
Wednesday (Day 66): Buybacks: supply shrinks, price tends to rise. Quote from O'Neil on supply destruction.
Thursday (Day 67): Heavy days vs. quiet days, what the volume bars actually say about institutional positioning.
Friday (Day 68): The S checklist. Sister newsletter plug.
After this run, M3 W2 (Days 71-75) opens the L, Leader vs Laggard, with David Ryan's fourth feature on relative strength.
ONE QUESTION THIS WEEK RAISES + ONE WEEKEND HABIT
A question this week's content raises immediately:
Q: "If I can only learn one thing from M3 to apply this week, what is it?"
Volume reading. Not because it's the single most important S concept long-term (float and institutional sponsorship probably matter more over time), but because it's the most actionable right now. Every chart already shows volume bars. The skill of glancing at them and reading accumulation vs. distribution in ten seconds compounds across every future chart you look at, and it's the piece you can start practicing this weekend without waiting for the rest of M3.
The weekend habit:
Take three stocks from your watchlist. Pull up the daily chart for each and look at the volume bars over the past 30 trading days. Count how many days had volume at least 30% above the 50-day average, then split those into green (closed up) vs. red (closed down). A stock with 5+ green high-volume days and 0-1 red ones is being accumulated; the reverse is being distributed. Optional bonus: run the integrated C+A+N screen from Monday's lesson on the same three stocks and see whether the volume signature and the fundamental pass rate agree.
TOMORROW, PATTERN OF THE WEEK #9
Tomorrow is Pattern of the Week #9, the third cup-with-handle of the year. The example is Netflix in 2010. The first two (Day 7 Apple 2004, Day 35 Costco 2003) covered anatomy and handle specifics. Tomorrow's NFLX case covers the post-business-model-change cup, what the pattern looks like when it forms in a stock mid-transition. NFLX in 2010 was moving from DVD to streaming; the cup that formed reflected the market repricing that shift.
Reply with one thing
From this weekend's volume exercise (or the integrated-screen bonus), reply with the ticker that showed the strongest accumulation signature over the past 30 days, and whether it also passed the C+A+N screen. We'll feature real replies once they start coming in.
— Beginners in Stock Trading
Educational content only. Not financial advice. Past performance does not predict future results.
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