ValuePickr Forum

52 week highs and all time highs strategy

@A_shah

We are interested in stocks that take out 2,3, 5, 10 years highs and not 2,3,5 month highs. Because stocks that are strong and in an uptrend are going to keep posting consistently higher highs.

Here one has to understand the psychology of the price action. Why would a stock like Bharti take out an 11 year old high posted back in 2008 now amidst all this general uncertainty? And Bharti is a heavily traded counter and its difficult to manipulate its prices. So obviously majority of market participants see a distinct set of positives for the company to take the stock price to all time highs. And all this while Bharti stock price has been making a base by consolidating between a broad range of 250-450 (plus or minus a few rupees) throughout these 11 years. So this kind of jump above the range and then posting all time highs has a definite meaning. But that does not mean we have to go out and buy tomorrow. Because we know a thing or two about fundamental analysis, we will don that hat and try to find out the triggers lined up. Most of them are apparent to us. (dont ask me which ones :grinning: )

28 Likes

Thank you for starting this great thread @hitesh2710. I am learning ‘how to invest’ from last 3 years and after understanding multiple investment strategies, i found this 52 week high strategy suits my behavior as safest approach. Here is what I do to filter stocks -

  1. Fundamentals should be good (like debt to equity <1, no pledge, ROE ROCE 15-20% etc)
  2. Monthly trend should be up
  3. Weekly trend should be up
  4. Daily should be up and near its 52 week high.

As you rightly pointed out in your post -RETRACEMNT or TREND REVERSAL - I am still learning on how we can confirm whether it is a retracement from 52 week or a trend reversal. This thread really helps me in learning this.

Appreciate your expert views on this.

I was closely following GMM P that is falling into this category.

2 Likes

@RajeevJ

We can put up analysis on work in progress companies also. But we dont want to litter the thread with other types of patterns which will dilute the key message of this thread.

For other types of technical patterns, there are other threads like bull therapy etc.

Even in stocks that have corrected a lot, there will be sideways movement for a long period of time and then suddenly that stock will make a move to post a 3 month, 6 mnth, 9 month or 12 month high and that’s when we want to sit up and take notice. Again not to jump right in but try to figure out what’s changing in the company and whether the recent strength shown is sustained or not.

3 Likes

Hi all,

Buying stocks at all time highs / 52w highs requires a mindset change because of price anchoring. If you have recently purchased a stock and it is up by lets say 25% or even more - its tempermentally difficult to buy more and there is a tendency to wait for a correction peventing one from building a large position.

If one can somehow not be very sensitive to price anchoring, then thats a step in the right direction.

In my view, the main component of a succesfull 52w plan is not the high itself but identifying a base formation. Identifying the base formation correctly and counting bases are critical to successfully execute this plan. Maybe @hitesh2710 bhai can guide on some of the nuances of identifying a good base using his vast experience. There are ofc many books available around this but some pro tips always help :grinning:

Thanks
Bheeshma

12 Likes

Hi Hitesh Bhai,
My approach is a different one. I follow my monthly chart for Divergence for already established names in the particular sector like Bharati Divis IPCA,etc. These might have a temp set back for various reasons but the underlying theme is strong and there is no deterioration in fundamentals ( may be temp here also). I follow 52 wk high for new names like Astral, PII ( but these are established now) and wait for a dip not more than 20% to enter. Power India, Escorts,Rallis,

etc come in this category now which I am closely tracking now.

If you see this chart, Divergence gave a buy signal around Rs 400/-. Other examples I have given in Bull therapy.

3 Likes

Please Note:
This thread has been categorised under the Technical Practitioners Corner - a Moderated Category. Please have a look. Might be useful to keep updated on such new initiatives at VP. If you can draw attention of senior practitioners (you may know) to this initiative, please help.

This thread in particular is very important to keep the focus on the Strategy deliverable - Shortlist of Actionable ideas - help us prioritise (deep-diving) fundamental analysis, as needed. Though each of us is free to use the outputs as it resonates with us individually - there is a bigger VP imperative behind - to influence/push collective conscious effort.

Please be conscious of the above goals while posting/replying - how does my post/reply add value? does my post help take forward the discussion? And please be patient - all posts and replies in this thread will require Moderator approval, hereon.

Thanks.

6 Likes

I did a basic test of the 52-week breakout strategy. Here are the results.

Duration - 2007 till date
Universe - Nifty 500
Frequency - Quarterly reset
Max Drawdown - 38%
CAGR = 27.23%
Strategy = But top 10 based on momentum filter

Basically, if you buy the top 10 stocks amongst those which are hitting 52-week highs and hold it for 3 months, you get a very good return. If you can overlay it with an index filter and a stop loss mechanism, it could actually give pretty decent results without much hassles.

40 Likes

One of the best charts from the cement sector is of Shree DigVijay Cement. For years due to miss management or whatever, the price of the stock had gone nowhere. But after change of hands, it has managed to clear its long term trend line.

7 Likes

Hii guys,

My doubt is that how do you know when the stOck which is making highs everyday is in good position or now turned into bad position
I am invested in gmm and it is making new highs everyday.
Fundamentally it is a very strong company but is this coming into a risky territory or its just the beginning.
How can we analyse that ?

Bayer Crop Science has crossed 5000 after 3 years (June 2017 was when it last reached 5000 Rs).

Stock is making a Flag pattern on Daily Charts where immediate targets come to Rs. 6500

6 Likes

Flag Breakout Pattern in Shree Digvijay Cement. Target coming to 55

Though its a small cap and very illiquid (often chart patterns dont play out fully in these stocks) @hitesh2710 sir to guide

3 Likes

Hi Hitesh bhai,
Should stocks making all time high be given more weightage compared to those making 52 week high under this strategy ? How do the two rank in preference ? Many thanks

@ashwinidamani

Previous all time high of divgijay cem was 46.8 and the recent high missed it by 10 paise. As you say, flag target is close to 54-55. So I think there might be some consolidation/base formation and then it can take off. Difficult to predict the exact trajectory.

2 Likes

@A_shah

Interesting question. The obvious logic is that stocks crossing all time highs are to be preferred over those crossing 52 week highs.

e.g Stocks like alembic, which have crossed previous all time high of 792 would have a free zone on its way up and can fly hard.

Whereas stocks like sun pharma which has been posting 52 week high above 485 is facing supply in the 500-510 range. Once it overcomes this, it can go higher but since it has fallen from levels as high as 1200, it will face supply at various zones on its way up.

But one has to remember that a stock that posts all time highs started off by consistently crossing 52 week highs. Here one has to try and find out fundamental triggers. If these triggers suggest strong upsides, it makes sense to get in these situations too.

22 Likes

When a stock makes all time high, then all the shareholders are sitting at profit and no one is in loss. The selling comes due to profit booking by some but in such stocks the selling pressure is less.
Whereas the stocks which makes 52 wk high but are below all time highs may have some longterm shareholders sitting at loss and waiting to breakeven plus they will have resistance zones where selling will come by technicians and they will also encounter profit booking by those who bought at lower prices. So the selling pressure is more as compared to all time highs.
Generally it is the leaders which make all time highs and not the laggards. Even when the laggards do, they do with great difficulty which is reflected in the chart pattern.
However, there are other factors also and i have not tested strategy of buying purely on basis of lifetime highs.

15 Likes

Hi Hitesh Sir,

Read some blogs of Mark Minervini. I came across the name of Mark, a stock trading Wizard, very recently. My bad, In fact. I read the Minervini trend template. Checked some ready made screeners in Chartink. It throws up 15 odd names which surprisingly don’t have much overlap with 3 m/6m top gainers , 52 week high , pharma names, or typical quality names etc. Seems its some different track altogether. That makes me bit jittery.

Would be interesting to know your experience with Minervini template and screens to make a portfolio of lets say 15 stocks. My plan is as below along with top 15 stocks from screener for your reference.

Broad Level Strategy

  1. Create a 15-stock portfolio of Minervini screener

  2. In parallel, study earnings growth of the stocks and look for Techno-Funda concurrence.

  3. Load up slowly on stocks where momentum is backed by fundamentals/earnings growth.

  4. All this while exit on each stock is strictly based on % trailing stop loss of 20% system

  5. 1.5 % loss on each trade

Minervini Screen Stock Portfolio

  1. Alembic Limited

  2. HISARMETAL

  3. Granules India Limited

  4. Escorts Limited

  5. Jubilant Foodworks Limited

  6. Reliance Industries Limited

  7. Info Edge (india) Limited

  8. Berger Paints (i) Limited

  9. Muthoot Finance Limited

  10. Tata Chemicals Limited

  11. Adani Green Energy Ltd

  12. Balkrishna Industries Limited

  13. Multi Commodity Exchange Of India Limited

  14. Dhanuka Agritech Limited

  15. Aarti Drugs Limited

Wish you great health and wealth :blush:

3 Likes

I also prefer to do momentum trading and monitor 52 week highs ( all time highs even better). Also the list gives an early indication of the sector which is currently doing well ( from short to medium term perspective). I prefer to have higher allocation to the sector where the stocks are hitting all time highs. esp the ones which break out first.
I think at present, the agrochemical sector is showing strength. I have invested in Coromandel International ( highest allocation), Mahindra EPC , Bayer crop science, Astec Lifesciences (presently consolidating) and PI Industries ( yet to break out properly as compared to other stocks, minor allocation). Also another criteria i look for is good growth in recent earnings which is the case in these stocks.

1 Like

Bayer signal came long back. It is in new orbit now. Invested .

2 Likes

My new investments based on this strategy Swaraj and VST


Will update when the price touches the green line

3 Likes

Vaibhav Global has recently crossed its all time high…could be studied further.

Rgds
RR
Disc: Invested for fundamental reasons

1 Like