In the stock market, share prices fluctuate frequently recording the new highest and lowest price for the day. To let the market participants know the highest and lowest price that a stock has achieved in the past year (52 Week), stock exchanges and financial websites record 52 Week high and 52 Week low prices.
In this article, we will tell you what is 52 Week high and 52 Week low price of a stock and how these 52-week price ranges are important for trading and investing.
What is the 52 Week high
52 Week high means the highest price at which a stock has traded in the stock exchange for the last one year. The 52 Week time period equates to one year.
This means 52 Week high is the highest price at which a particular stock has been traded over the past year.
To get a 52 Week high price of a stock, take daily closing prices of all last trading sessions for the stock within a year or 52 Week, and from that, they take the highest closing price.
Market participants take 52 Week high as stock’s resistance level if it did not cross the limit for a while.
What is 52 Week low
52 Week low means the lowest price at which a stock has traded in the stock exchange for the last one year.
Market participants consider the 52 Week low as the support level of stock.
The range that exists between the 52 Week low and the 52 week high is referred to as a 52-week price range. It tells you how far a particular stock’s price has moved within the past 52 Weeks.
Most of the traders and investors in the stock market compare their current price with the 52 Week high/low price to determine the predicted future price of the stock.
Example
Suppose you are looking at ABC limited stock’s price over the previous year, which is 52 Week.
You find that during this past one year (52 Week), ABC limited’s stock traded at Rs 100 per share at its highest and Rs 40 per share at its lowest.
What does this mean? It means the 52 Week high price for company ABC limited is Rs. 100 and 52 Week low price is Rs. 40.
What happens when a stock reaches 52 Week high / low
When you see a stock heading towards a new 52 week high, what is your initial reaction?
You might be thinking of selling the stock. Or, if the stock is about to rally due to strong fundamentals, you might be thinking of adding it to your portfolio. Based on the situation, you can have different views.
Knowing the 52 Week high and 52 Week low price of a stock, you can easily gauge where the stock is trading right now versus where it was in the past year.
52 Week high or 52 Week low price is an important point in the minds of market participants.
52 Week high/low should not be the only criteria for your decision to buy or sell a stock. As a smart investor or trader, you should also take other fundamentals and technical indicators into account.
Different market participants consider 52 Week high/low prices of stock differently.
Some traders buy the stock when price exceeds its 52 Week high considering that if a price breaks out from its 52-week price range, then there must be enough momentum that can push the price in the same direction. The 52-week range is generally broken when the company’s sales are up, profit is increasing, and earning prospects are bullish.
Traders sell their stocks when the price falls below the 52 Week low. When a stock falls below the 52 Week low but fails to register a new closing 52 Week low, it may be an indication of a bottom.
This means market participants consider a 52-week high as the resistance level and 52-week as support level of the stock.
Many investors refer to the 52 week high and low when looking at stock’s current market price. They believe that when the price is nearing the 52-week low or below it, it’s a good time to buy. Likewise, when the stock is approaching the 52-week high, it’s time to sell the stock.
What do you think? Is it better to buy a stock only based on its 52-week high/low price?
If you follow the buy low, sell high strategy blindly, you might be tempted to buy some stocks when it approaches its 52-week low thinking it can be a great opportunity to make money.
Remember, the decision to buy or sell a stock should not be based only on the basis of highs and lows of a stock price. Buying stocks at a low level is a good decision only when you have considered all other fundamentals of the company. If you are investing only on the basis of a 52-week low or high level of the stock, then you are not investing, it’s speculation or gambling. Therefore, buying low, sell high isn’t always accurate.
New 52-week high of a stock is a positive signal, however, it does not excuse you from performing proper due diligence before investing in it. You should always use fundamental analysis in order to find out how the company is performing and will perform in the future before investing.
Is it a good buy at a 52-week low price?
When a stock approaches its 52 week low, the question arises “is it good to buy the stock at a 52-week low price”.
Here are few possibilities of reaching 52-week low;
- Weakness in the company’s financial
- Higher debt in the balance sheet and the probability of failure in repayment of debt
- Poor management to manage the company’s cost and profitability
- The market has lost faith in the management
- Sectoral issues
- Economic Downturn
Market participants always look for opportunities to buy the stocks at a lower price and then sell at a higher price to make a profit.
Due to this reason, few amateur market participants think that buying at a 52-week low can give them multiple returns or it will turn into 10 or 100 baggers for them. Remember, it can be a falling knife. If you try to catch it, you may get sliced.
You should not only look at the stock price while buying stocks. You need to understand the reason behind the fall in price. There can be reasons which will force the company to close its business.
You should not care more about stock’s 52 weeks highs and lows; instead, you should concentrate on valuation and prospects. Remember, stock at a 52-week low does not necessarily mean it’s cheap or undervalued. You have to look at the quality first before looking at the price.
Here are a few most important fundamental factors you must look at before buying a stock;
- Management
- Growth prospects
- Earnings
- Debt structure
- Cash Flow
- Business potential
Therefore, your main focus should be on the company’s fundamentals and valuation, not price alone. If you find the stock is trading below its intrinsic value and there is enough margin of safety, you can invest.
Using fundamental and technical analysis together, you can get a clear picture of stock’s future price movement.
Financial publications, websites and stock exchanges publish a list of stocks every day that hit their 52-week high price and another list of those that hit a 52-week low. Here are links to get the list;
Link 1 – From BSE to get a list of stocks with 52 Week high and 52 Week low.
Link 2 and Link 3 – NSE site for 52 Week high/low for the day.
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