Buying Stocks at 52 Week Highs - What the Research Says -- with David Moadel
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heart of the
hello friends and welcome to looking at the markets with David Modell do you
like to buy hi no I know what you're thinking that's not what I meant
what I meant was do you like to buy a stock when it's at its 52-week high
price meaning the highest price that it's been in for the past year that goes
against my nature I tend to prefer to buy stocks when they're low and then
sell them when they're high but if the research and the data says that its
profitable to buy stocks at their 52-week high then maybe it doesn't
matter what my gut feeling is or what my nature is because the research and the
data is probably more important than what I feel so well first of all I'll
show you one way that you can find stocks at their 52-week high this is fin
viscom and i am not being paid to make this video by fin biz or anybody like
that so yeah it's just a it's a pretty good stock screener but there are other
ones you don't have to use this one and so you might go to the the screener
button there on fin biz at the top and then you can go to the descriptive tab
and I chose large cap stocks because I'm more familiar with them they're easier
probably to research maybe but you know there's some really good small caps and
micro caps and mid caps as well and then you can go to the technical tab and go
to 52-week high or low and then go to new high and that should get you the
stocks that just today achieved their 52-week high price and I'm just curious
to see which ones did let me go to page one and I look for familiar names ones
that I've researched before like Chipotle and it'll bring up the chart
there and indeed it is at the 52-week high yeah that's above six hundred
dollars a share salesforce that's a familiar name okay and look at
that 52-week high yep I'm just curious to see if there any other 52-week highs
there we have a Riley automotive looks like it broke out of a range there and
then Shopify okay definitely breaking up breaking out to
the upside and Starbucks almost reaching $70 a share
hey Paul it's a transfer has been an integral sorry about that
advertising Starbucks reaching almost $70 a share after being in the 60s for a
long time alright so that's one way to search just look out for those
advertising spots they're on thin vis but hey they have to pay for the website
somehow right alright so here's some research
it's old all right but from the Journal of Finance and I like journal articles
if there are from reputable publications because they really do their due
diligence they really do the research all right and let's see what they found
I'm not gonna read the whole thing but I'll put a link in the description below
this video to this journal article and you can decide for yourself whether this
is valid and what they did was they concluded through the research that what
happens is when a stock reaches its 52-week highs traders are slow to react
to the good news because a stock whose price is at or near the 52-week high is
a stock for which good news recently arrived right that makes sense I mean
for a stock to be at the highest price it's been at for the past year probably
had some catalysts some good news to make it go that way and they're saying
in this paper the authors are saying that when it gets there traders
yeah they reacted to the good news but they're a little bit slow to react to it
so you know more traders will come in and react a little bit later to the good
news and push the stock up even higher that's what they're saying and let's see
what else they had to say about that we found they found that nearness to the 52
week high is a better predictor of future returns than past returns even
Wow and that nearness to the 52 week high
had predictive power whether or not stocks have experienced extreme past
that's really interesting so let's see why it happens well we kind of explained
it already traders are slow to react they react
gradually to the good news and this is a little bit more of an explanation there
when good news has pushed a stock's price near to near or to a new 52-week
high traders are reluctant to bid the price
of the stock even higher even if the information warrants it even if it
deserves to go higher traders are slow to react maybe they're
hesitant because it reached that 52-week high and maybe traders are thinking boy
it's kind of expensive now but then the information the good news eventually
prevails it eventually wins out and the price then moves up resulting in a
continuation going even higher similarly when bad news when it goes
down and hits that 52-week low kind of area
similarly when bad news pushes a stock's price far from its 52-week high like
near the 52-week low traders are initially unwilling to sell the stock at
prices that are as low as the information implies so you know when it
reaches that really really low point they're reluctant to sell but then
eventually the information prevails the bad news prevails and the price falls
even further alright so this is the research and I'm not going to go over
all the numbers they've got plenty of data and charts and all that good stuff
and hey if you can understand if you can understand this formula then that's
awesome yep then you're pretty good at math all right I have to give you credit
for that and all the data and charts are here all right so if you want to read
all that cool and you really should you really should check any study or
information or research for yourself don't just believe anything that's said
out there you have to make the final decision and so my hesitation to buy
something at the 52-week I maybe maybe I'm wrong about that this research says
I am does that mean you should take a
massively large position at a stock that's a 52-week high no you should
research it for yourself and buy it because you want to buy it and do your
own due diligence and make your own decision all right
and I do help people I offer coaching so if you want some coaching to help you
decide what are some good stocks that are right for you and you can make the
final decision on that and I help people to put together their own trading or
investing plans and you can email me if you'd be interested in that David Modell
at gmail.com and hey why don't you give this video a thumbs up alright let me
know in the comment section also what do you think of this strategy is this crazy
is it crazy to buy something that's at the highest point that's been at for the
past year or maybe it's a good momentum strategy what do you think alright hey
if you haven't subscribed to my channel why not do that alright that way
hit that notification bell and you'll know you'll get notified whenever I put
out in a new video like this one all right
thanks a lot I really appreciate it I'll talk to you again soon
when you find the man
ha