When a stock hits a new high, like a new 52-week high or a new all-time high, many investors will quickly get interested and start to take notice. This happens for some very good reasons.
First of all, a stock hitting new highs is a clear example of strength, and when you're investing in the stock market, it's always a good idea to own stocks that are strong and displaying strength. It shows that the stock is in high demand and that big money (institutional investors) is supporting the price and snapping up shares at any cost.
Another great reason that can lead to new highs for a stock price is that a company's strong fundamental backdrop is causing its price to surge. We saw this in companies such as
Green Mountain Coffee Roasters
this year. Both firms were growing sales at extremely high rates, especially high for a period of poor economic growth. As these firms grew their sales at more than 20%, the stocks followed suit and rose to new highs, helping anyone invested in the stocks make a pile of money.
It's also worth noting that both of these stocks were heavily shorted, and as the bears were squeezed out of their positions, it helped push them to levels they probably wouldn't have reached otherwise.
The really great thing about stocks hitting new highs is that it often means shares are heading much higher. Just take a look at how
( DDRX) and
preformed after these stocks started showing up on the new-high list. Diedrich Coffee is up over 900% year-to-date, and Stein Mart is up over 630%. For those watching the new-high list, it was very possible to catch these stocks early in their moves and profit handsomely as they soared. It's possible on pullbacks that these stocks could still be very good buys and still be on their way toward much higher prints. That's the beauty of a new high: It's usually a recipe for more new highs!
According to Jim Cramer,
a stock can also make a new 52-week high if the company operates in a niche market
. Cramer mentioned on a recent "Mad Money" episode that
(CML) operate in niche markets and are making new 52-week highs because both companies have a history of beating earnings and of under-promising and over-delivering when they report numbers.
The reason a stock makes a new high isn't always the most important thing to focus on. From a technical perspective, what's important is that the stock is trending in the right direction, with the opportunity for shareholders to enjoy the ride.
With this in mind, let's take a look at a few stock charts that are at or near new highs that could be setting up to move even higher.
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