| There is no lack of ideas on how to go about picking winning stocks. Ideas range from selecting stocks based on dividend yields to low price earnings. This article focuses on spotting potential winning stocks from the 52 week high and low list. This list can be found in most major business daily publications and popular financial web sites. The major stock exchanges such as the New York Stock Exchange and the NASDQ gives a list of companies breaking yearly highs and lows for each trading day. Why Stocks Hit 52 Week Highs
Stocks hit 52 week highs for different reasons. Because most investors are not holding these shares at a loss, there is little selling pressure. Thus, the price momentum is skewed towards the upside.
- The corporation is being bought out.
- A new market changing product has been unveiled by the company.
- The company is posting record sales and profit.
- Investor sentiment is extremely positive on the industry in which the company is involved.
Picking Stocks Based On 52 Week Highs
The key to picking winners based on the 52 week highs is determining whether the corporation's positive trends will continue. If the business developments are just a one time affair, the upward momentum on the stock price will probably soon run out.
- The corporation has a history of new 52 week high share prices.
- Has a solid record of growing sales and profits.
- The corporate balance sheet has relatively low debt.
- There isn't much media coverage on how well the corporation is doing.
Why Stocks Hit 52 Week Lows
The majority of stocks breaking 52 weeks lows deserve to be beaten down and can potentially become worthless. Some of these stocks will become de-listed and disappear from the market. Other stocks will just languish at the bottom, frustrating investors hoping for a quick turnaround. Here are reasons why stocks hit the skids.
- Massive fraud committed by the management team
- The company is bankrupt
- Constantly posting lower sales and losses
- The industry the company is in is rapidly shrinking. Just think of the horse carriage industry.
Picking Stocks Based On 52 Week Lows
Amongst the junk, there are treasures that can be found. Investment sentiment has gotten too negative and the company positives got overlooked. Here are some developments to look for:
- The company has successfully restructured its debt and is now generating profits.
- The company went through a major product cycle transition and is poised to win back market share.
- One time events dragged down company profits
- The company is trading at low sales and profit multiples.
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