When the overall market environment is bearish, chances are that even good stocks do not perform well and retrace. When the markets recover and resume their uptrend, a set of stocks start to outperform the markets. In this newsletter, we will learn how to identify these stocks using the logic of 52-week high.

What is 52-week high?

Many market participants often come across the term 52-week high in news reports or financial articles. But what does it actually mean?

The 52-week high refers to the highest "High" price that a financial instrument has reached over the past 52 weeks (one year). This high point could have occurred today, yesterday, or on any trading day within the last year—it simply marks the highest price level recorded during that period.

This level holds significant importance for many traders. It is frequently incorporated into trading models, either as a criterion for stock selection or as a potential entry point their strategies. But why? What does this level represent?

Why is 52-week high important?

52-week high price is important for two reasons:

1. Identifying stocks starting a new uptrend

2. Identifying stocks already in an uptrend

When a stock has been consolidating for several years or forming a cup-like pattern, the 52-week high often serves as a significant resistance level. This extended consolidation could result from broader market corrections or the stock undergoing a potential turnaround. As the price approaches the 52-week high, it reflects growing interest in the stock. A breakout above this level signals the breach of a key resistance point and may indicate the beginning of a new trend.

In cases where a stock is reaching a new all-time high (ATH), the 52-week high and the ATH may coincide. This is particularly noteworthy, as it suggests the stock has entered a resistance-free zone with no historical price ceilings. Furthermore, when the price is establishing new ATHs, monitoring 52-week high levels can help identify temporary retracements and potential support zones during pullbacks.

Identifying 52-week high stocks

Using 52-week high stocks, a trader can identify potential stocks and create a basket of stocks to keep a watch on. Rather than looking at individual stocks, many online tools can help us scan these stocks for free. I have discussed one such tool in chapter number 5 of my free course Trading Techniques on The Noiseless Trader platform. Do check out this course to identify and create a basket of stocks that are near 52-week high along with many such tools.