What is the Most Profitable Approach to Trading New 52-Week High Stocks?
(By Glenford S. Robinson)
Well, any stock hitting a new 52-week high has performed exceptionally well during a one-year span. So, one would think that if a stock has performed well for the span of one year, traders or investors should buy the stock. Well, for the long-term investor that approach could be a profitable strategy. However, for the trader who is in the market to make a weekly living as a short-term trader, that strategy might not be such a wise one.
For the short-term minded trader who elects to buy the stock as a result of its 52-week outstanding performance, short-term trouble could be on the horizon. The main reason why there could be trouble is that professional and institutional traders use a stock’s 52-week high mark has a take-profit point where they lock in their gains accrued over the past year. Many professional and institutional traders give up further price-increase to lock in their gains although 52-week highs represent bullish sentiments.
In fact, stocks hitting new 52-week highs are most often than not profit-taking targets, resulting in massive down trend reversals after the 52-week mark has been reached. So, the most profitable short-term approach in trading stocks hitting new 52-week highs is shorting the hell out of the stock starting on the day the stock hit its 52-week high. Following such strategy will be proven very profitable when employed on a short-term basis. Don’t expect to short 52-week highs stock on a long-term basis because there was a valid fundamental reason why the stock’s price has performed well over the span of 52 weeks. So, if a dose of long-term shorting is employed, trading account destruction would be inevitable.
A short-term shorting approach is therefore the most logical approach to take in such instance with a dose of discipline sprinkled over the greed of long-term gains. Greed is never good. Fear is better because it puts profits in traders’ pockets when used wisely. The successful trader avoids greed and trades fear not succumbing to it. She trades fear by shorting greed to make a profit.
Trading fear will make you the most money as a trader, while succumbing to greed and fear will cause you to lose a lot of money as a trader.
A long-term strategy could be very profitable when trading 52-week high stocks if the long-term strategy is followed.
The 52-week high mark for a stock can either be used as an entry point or an exit point in trading the stock. It is for that reason why the 52-week high mark is such an important juncture in the price movement of a stock for traders.
Disclaimer: ©Mstardom, Inc. Mstardom Finance does not provide investment advice.
A 52-week high/low is the highest and lowest price that a stock has traded at during the previous year. It is a technical indicator used by some traders and investors who view the 52-week high or low as an important factor in determining a stock’s current value and predicting future price movement.
Mr. Glenford S. Robinson is the Chief Executive Officer and Founder of Mstardom Finance. He is the editor-in-chief of News and Magazine article publishing. Mr. Robinson is also the lead developer of the Mstardom Finance Platform at Mstardom.com. He is passionate about quantitative finance and technologies associated with that discipline, such as python-based algorithmic programing. Mr. Robinson is also a Clinical Laboratory Scientist currently practicing laboratory medicine. When Mr. Robinson is not practicing laboratory medicine, writing articles, or studying finance, he is creating mathematical and statistical modules, using quantitative approaches to identify trading opportunities in the Forex and Stock Market.