The 52-week range of a stock is the range of the lowest stock price and highest stock price shares of the company have traded in over the past 12 months. For example, if a stock's lowest share price was $4.99 in the pas 52 weeks, and the highest share price for the previous year is $25.00, the 52-week range would be $4.99 to $25.00. The 52-week range consists of a stock’s 52-week low and a 52-week high.
Stock's 52-week Range
The 52-week range could provide investors with important information regarding the stock's price direction and market value. Stocks trading near the 52-week high could indicate solid performance, while stocks trading near their 52-week low could mean that the stock is distressed or undervalued by investors. The 52-week range of a stock, combined with other metrics, can help investors gauge share price performance including:
- Forecasting share price direction
- Determining buy and sell points
- Stock price volatility
A stock with a large differential between its 52-week low and 52-week high indicates that share prices could potentially fluctuate within the 52-week range. Furthermore, stocks trading at their 52-week lows with a large gap from the 52-week highs could indicate a declining trend in share prices. Inversely, a stock trading at new 52-week highs could indicate robust growth in share price. In that sense, the 52-week range may be used to help determine the overall health of a stock.
Trading a Stock's 52-week Range
The health of a stock influences the stock price. Stock prices are dependent on how the companies perform; therefore, an investor can compare the current stock price to the 52-week range and reveal a few outcomes such as:
• Current stock price near or below the 52-week low possibly indicate a poor performing or undervalued company
• Current stock price near or above the 52-week high possibly indicate a company that is outperforming or overvalued
The 52-week range provides data to help form investing strategies trying to uncover possible trends of a stock's potential. Investors should understand that a stock's 52-week range is only part of a stock's make-up and doesn't tell the entire story. When investors compare the current share price to the 52-week high or 52-week low, it provides information that should be examined further. Examining a stock's 52-week low and 52-week high is essential, but the metrics should be used with other information about the stock to achieve more comprehensive due diligence.