What is a 52 Week High?
- A 52 week high, as the name suggests, is the highest price that the security/ stock has traded over a 52 week period i.e. a year. It is a technical indicator that is used to analyse the security’s current price. The 52 week high is also used to predict future movements as well.
- A 52 week high represents a bullish sentiment of the market.
- The 52 week time period is arbitrary and has been chosen out of convenience. However, this serves as a useful means of trend identification.
How is a Stock Market High Determined?
The 52 week high is determined by the closing price of the security. It is not as much as the fluctuation that matters in its calculation as opposed to it breaching the existing upper value of the stock. It is also interesting to note that it is not uncommon for the volume of trading to spike once the 52 week high barrier is crossed.
What are the Uses of 52 Week High?
- There are many uses to the concept of a 52 week high such as determining the entry or exit point of a given stock, the level of resistance provided to the security, etc. It a chance to the investor to make his or her investment decision in an informed manner with sufficient cues about the direction of the market and in particular the position of the stock.
- These fluctuations also indicate to the investor that the stock has reached its peak and may not rise any further in the near future. This implies that reaching a 52 week high intraday and then closing negative on the same day indicates that the price may not go up any time in the near foreseeable future.
- Stock brokers and institutions use the 52 week high to set take profit orders as a means of locking gains.
Effect of 52 Week High on Stocks
A 52 week high shows that there is a strong chance of significant gains ahead. It often nudges investors to buy more securities of the company. As risky as this may sound, the results can be quite rewarding too.
