Alton Hill is a Cofounder at TradingSim. He has a passion to help people and found that one of his ways of doing so, is through the world of Day Trading. Alton’s skillset is in Product Development and Design Thinking which he uses to write and improve the overall experience for TradingSim.
Bar Chart – you will need to locate the 52-Week High link on the page
How to Trade Stocks at 52-Week Highs
Now that we have covered how to identify stocks making new highs for the year, let’s talk through some basic trading strategies.
#1 – Finding the Right Patterns
Every new 52-week high is not created equal and the last thing you want to do is buy every stock making a high.
The key thing you want to assess is the quality of the pattern going into the breakout.
One of the simplest patterns to recognize is the bull flag pattern. In the below example, you can see how the stock began to develop a flag near the 52-week high, followed by a strong breakout that held the highs of the day.
Bull Flag – 52 Week High
These are the types of chart patterns that can increase the likelihood of a 52-week breakout holding and going higher.
Rounding Bottom – 52 Week High
Above is another common chart pattern – the rounding bottom.
On a 52-week breakout, the pattern will take over a year to develop, so patience is required. The first one or two breakouts will likely be head fakes as the smart money will use the opportunity to accumulate shares.