Expert Mark Minervini believes buying at 52-week high is the best strategy. Picture Getty
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Buying a stock at its 52-week highs can be counterintuitive for many investors because it goes against the traditional idea of buying low and selling high.
But there are reasons why buying a stock at a 52-week high might be considered.
For one, it can potentially lead to further gains if the trend persists. A stock reaching a 52-week high can signal underlying strength in the company, its industry, or the broader market.
In addition, when a stock breaks out to a new 52-week high, it can attract the attention of other traders as breakouts often lead to increased buying interest that could propel the stock’s price even higher.
One expert who likes the idea of buying stocks at their 52-week highs is Mark Minervini, an acclaimed stock market trader and author of the book “Trade Like a Stock Market Wizard.”
In his book, Minervini discusses his approach to trading, which includes buying stocks breaking out to new highs.
“When you buy a stock making a new high, you have to believe that it will go higher, and it often does. Buying new highs is a higher-probability strategy than buying low and trying to sell higher,” he wrote.
“I have found that the best stocks to buy are those making new highs because they have already proven themselves to be winners.”
Minervini believes the 52-week high in particular is a very significant technical level that serves as a reference point for many institutional investors.
He went on to say that the fact a stock is trading at a new high indicates that there is a strong demand for the stock at that price level.
“In my experience, the biggest winners tend to make new highs along the way.”
“I believe buying a stock that’s trading at a new 52-week high is a higher probability strategy than buying a stock that’s declining.
“It’s just much easier to make money when a stock is moving up than when it’s moving down,” he noted.
Apart from the 52-week high, there are a couple of other indicators used by the market to signal momentum of any given stock, including:
They are all explained below.
Traders often view the 52-week highs as entry signals.
This is due what’s called the “52-week high effect” – where if a price has broken out above its 52-week range, there must be some factor that generated enough momentum to further continue the price movement in the same direction.
On the other hand, if a stock is far away from its 52-week high, chartists believe the momentum will continue going that way.
10 ASX small caps at 52-week high
(data from Commsec)
| Code | Name | Price | How far from 52-Week High? | 1 mth return | 6 mth return | 12 mth return |
|---|---|---|---|---|---|---|
| MYG | Mayfield Group | $0.78 | 0.00% | 19.23% | 72.22% | 80.23% |
| TD1 | Tali Digital | $0.00 | 0.00% | 33.33% | 100.00% | 0.00% |
| CTE | Cryosite | $0.87 | 0.00% | 27.94% | -- | 19.18% |
| GWR | GWR Group | $0.12 | 0.00% | 16.16% | 59.72% | 41.98% |
| NTL | New Talisman Gold Mines | $0.02 | 0.00% | 5.26% | 5.26% | 33.33% |
| MAH | Macmahon Holdings | $0.26 | 0.00% | 15.91% | 70.00% | 82.14% |
| UOS | United Overseas | $0.61 | 0.00% | 11.93% | 22.00% | 9.91% |
| TRM | Truscott Mining | $0.07 | 0.00% | 37.25% | 11.11% | 48.94% |
| BSE | Base Resources | $0.25 | 0.00% | 108.33% | 47.06% | 28.21% |
| VNL | Vinyl Group | $0.10 | 0.00% | 28.00% | 77.78% | 92.00% |
The mining services contractor has been rising after announcing that it will acquire Decmil Group (ASX:DCG) to expand its civil business.
MAH will pay Decmil’s shareholders $0.30 cash per share.
MAH says the acquisition will be earnings accretive, and aligned with Macmahon’s strategic focus to diversify earnings, reduce capital intensity and improve returns.
Having Decmil will also provides an established, scalable foundation to accelerate Macmahon’s civil infrastructure growth.
The critical mineral digger has revealed a proposed 100% acquisition by NYSE-listed uranium and critical minerals producer, Energy Fuels.
Energy Fuels will offer 0.026 shares for every Base share as well as a special unfranked dividend of 6.5c per share, valuing the deal at 30.2c or $375 million.
The price is a 188% premium to Base’s last closing price of 10.5c and 173% premium to its 11.1c 20-day VWAP as of April 19.
Base says the merger of the two companies will establish a global leader in the critical minerals sector with a focus on rare earths, uranium and mineral sands production with a clear strategic development pathway.
Simple Moving Averages (or SMA) is another indicator that can be used to gauge momentum.
SMA is often used to determine whether a stock price will continue in the same direction, or if it will reverse a bull or bear trend.
As a general rule, if the current stock price is above the SMA, the price trend is up. If the price is below the SMA, the trend is down.
10 ASX small caps at prices above SMA
(data from Commsec)
| Code | Name | Last Price Value | Price vs. Simple Moving Average | Price vs. 20 day SMA | Price vs. 50 day SMA | Price vs. 200 day SMA |
|---|---|---|---|---|---|---|
| ADN | Andromeda Metals | $0.02 | >5% Above SMA | 0 to 1% Above SMA | < -5% Below SMA | < -5% Below SMA |
| ADY | Admiralty Resources NL | $0.01 | >5% Above SMA | >5% Above SMA | 1 to 5% Above SMA | 0 to 1% Above SMA |
| CT1 | Constellation Technologies | $0.00 | >5% Above SMA | -1 to -5% Below SMA | < -5% Below SMA | < -5% Below SMA |
| AGY | Argosy Minerals | $0.14 | >5% Above SMA | 1 to 5% Above SMA | 1 to 5% Above SMA | < -5% Below SMA |
| BIS | Bisalloy Steel Group | $3.40 | >5% Above SMA | >5% Above SMA | >5% Above SMA | >5% Above SMA |
| ASE | Astute Metals NL | $0.04 | >5% Above SMA | >5% Above SMA | >5% Above SMA | -1 to -5% Below SMA |
| CYM | Cyprium Metals | $0.03 | >5% Above SMA | >5% Above SMA | >5% Above SMA | < -5% Below SMA |
| MYG | Mayfield Group Holdings | $0.78 | >5% Above SMA | >5% Above SMA | >5% Above SMA | >5% Above SMA |
| TD1 | TALI Digital | $0.00 | >5% Above SMA | >5% Above SMA | >5% Above SMA | >5% Above SMA |
| AXI | Axiom Properties | $0.05 | >5% Above SMA | >5% Above SMA | >5% Above SMA | -- |
Admiralty says Admiralty Minerals Chile, its wholly owned subsidiary, has entered into a port receiving, stacking and storage iron ore concentrate service contract with Puerto Las Losas S.A.
The contract is for five years, and for the provision of services such as stacking and storage of iron ore concentrates, and transportation of goods directly or in connection with ports.
Admiralty is also currently advancing its own flagship Mariposa Iron Ore Project in Chile towards production, targeting first production in 2024, with a view to increasing production capacity from 2025.
The copper company presented an updated 2024 Mineral Resource Estimate (MRE) for its flagship asset, the Nifty Copper Mine in Western Australia.
Nifty’s Measured and Indicated mineral resource has now grown to 119mt at 0.84% pct Cu for 1 million tonnes contained copper.
The company says there is potential to further enhance mineral resource from existing mineralised heap leach inventory.
Here’s another momentum signal used by the market – the Relative Strength Index (RSI).
RSI is a measure of the strength of a stock’s momentum, either in the upward or the downward direction, and is used to indicate whether a stock is oversold or undersold.
Generally speaking, an RSI above 70 means a stock is strongly bought; and an RSI below 30 indicates that it’s strongly sold.
An RSI above 80 meanwhile is extremely bought, and an RSI below 20 is extremely oversold.
10 ASX small caps with RSI over 70:
(data from Commsec)
Code Name 2 Day RSI 9 Day RSI 14 Day RSI BIS Bisalloy Steel Group -- Overbought -- ASE Astute Metals NL -- Overbought Overbought AXI Axiom Properties -- Overbought -- BOC Bougainville Copper -- Overbought Overbought GLL Galilee Energy -- Overbought -- KME Kip McGrath Education Overbought Overbought -- RDN Raiden Resources Overbought Overbought -- CVW Clearview Wealth -- Overbought -- IMM Immutep -- Overbought Overbought SRV Servcorp -- Overbought Overbought
Immutep recently announced preliminary top line results from Cohort B of the TACTI-003 Phase IIb trial evaluating its drug, eftilagimod alpha (efti), in combination with current standard of care, KEYTRUDA (pembrolizumab).
The combination is used as first-line treatment of recurrent/metastatic head and neck squamous cell carcinoma patients (1L HNSCC) with negative PD-L1 expression.
Results show a preliminary 26.9% response rate, the primary endpoint of the study, and Immutep says that these are encouraging.
In addition, Immutep has also partnered with the Centre for Human Drug Research (CHDR) in the Netherlands to study a new drug called IMP761 in humans for the first time.
Under the agreement, CHDR – a world-class institute in Leiden, the Netherlands, specialising in cutting-edge early-stage clinical drug research – will perform a first-in-human Phase 1 clinical study of IMP761.
IMP761 is a special antibody that aims to help the immune system work better by restoring balance to the system and address the underlying cause of many autoimmune diseases.
The virtual office services company has been rising after announcing developments from its Middle East operations.
Servcorp said it was recently granted a regional headquarter licence issued by the Saudi Ministry of Investment, the first foreign corporation in the shared workspace sector to obtain this.
“Based on current multiples being achieved in the Saudi market for growth businesses, we could expect to see a significant value uplift for our shareholders, should the transaction be successfully completed,” said the company.
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