52 week high / low is the highest and lowest price that a security, such as a stock, traded over a period of one year.
Look at a glance
— The 52-week high/low is the highest and lowest price that a security has traded at over a period of one year and is considered a technical indicator.
— The 52-week high/low depends on the daily closing price of the security.
— Usually, the 52-week high represents a resistance level while the 52-week low is a support level that traders can use to trigger trading decisions.
Realizing 52-Week High/Low
This is a strong technical indicator usually we called 52 week high / low used by some traders and investors who view these numbers as an important factor in analyzing a stock’s current price and predicting its future price movement. An investor may show increased interest in a particular stock as the price nears either the high or the low of its 52-week price range (the span between the 52-week low and the 52-week high).
The 52-week high / low depends on the daily closing price of the security. Often times, a stock can actually break a 52-week high in a day but end up closing below the previous 52-week high and thus go undetected. The same applies if a stock hits a new 52-week low during a trading session but does not close at a new 52-week low. In these cases, the failure to make a new 52-week closing high / low can be very significant.
One way to use the 52-week high/low number is to identify an entry or exit point for a particular stock. For example, stock traders can buy a stock when the price crosses its 52-week high or sell when it falls below its 52-week low. The reason for this strategy is that if a price breaks out of its 52-week range (either above or below that range) there must be some factor in place that will create enough momentum to keep the price moving in the same direction. In this strategy, an investor can use stop orders to initiate new positions or to add to existing positions.
According to a 2008 study, it’s not uncommon for the trading volume of a particular stock to
increase once it crosses a 52-week limit. In fact, research has shown it. According to a study entitled “Volume and Price Patterns Around a Stock’s 52-week Highs and Lows: Theory and Evidence,” conducted by economists at Pennsylvania State University, the University of North Carolina at Chapel Hill, and the University of California, Davis in 2008 Small stocks that crossed their 52-week highs produced 0.6275% gain the following week. Accordingly, large stocks returned 0.1795% in the following week. Over time, however, the effect of the 52-week highs (and lows) became more apparent in large stocks. Overall, however, these trading ranges affected small stocks more than large stocks.
52-Week High/Low Reversals
A stock that hits a 52-week high intraday but closes negative on the same day could have peaked. This means that the price may not go much higher in the near future. This can be determined when it is a daily shooting star that occurs when a security trades well above
its opening price but falls later in the day to either close below or near its opening price. Often times, professionals and institutions use 52-week highs to set take profit orders to secure profits. You can also use 52-week lows to determine stop loss levels to limit your losses.
Given the uptrend inherent in equity markets, a 52-week high represents bullish sentiment in the market. As a rule, there are many investors who are willing to forego further price increases in order to secure their profits in whole or in part. Stocks making new 52-week highs are often the most vulnerable to profit-taking, causing setbacks and trend reversals.
If a stock hits a new 52-week low within the day but doesn’t hit a new 52-week closing low, it could be a sign of a bottom. This can be determined when it is a daily hammer candle that occurs when a security trades well below its opening price but rallies later in the day to close either above or near its opening price. This can encourage short sellers to buy to cover their positions and also encourage bargain hunters to act. Stocks that hit five consecutive 52-week lows are more prone to sharp jumps in price as a daily hammer form.
52-Week High/Low Example
For example, suppose ABC shares trade in a year with a high of $ 100 and a low of $ 75. Then
your 52-week high / low is $ 100 and $ 75. Generally, $ 100 is considered a resistance level, while $ 75 is considered a support level. This means that traders will start selling the shares as soon as they hit that level and start buying them as soon as they hit $ 75. When one end of the range finally breaks, traders enter new long or short positions depending on whether they have been broken the 52-week high or the 52-week low.