52-Week Range
A 52-week range is a difference between an asset’s highest and lowest prices over the past 52 weeks.
What Is a 52-Week Range?
A 52-week range is the data point that includes the highest and lowest price at which an asset has traded in the past 52 weeks ( which is around one year). As a result, it is often also called the yearly range.
The 52-week range offers information on an asset's
volatility and where its current price is relative to the highest and lows in the past year. If the difference is more significant, it indicates an asset has great volatility. However, this must be considered relatively. For instance, a $5 difference between the highs and lows for a $10 stock is not the same as that of a $100 stock. The former has price swings of around 50%, while the latter saw price swings of just 5%.
Checking the current price of an asset lets traders know whether an asset is vital (trading near its high) or weak (trading near its low).
The one-year period is arbitrary, and it may or may not hold importance to all traders. For day traders, the daily range is more important. For a long-term holder, the highs and lows over several years mean more than a single 52-week range.
Strategies Used for the 52-Week Range
The most straightforward trading strategy for the 52-week range is to focus on price relative to the highs and lows. Traders will be more likely to trade asset prices near the low end since the low often indicates a support level. Additionally, assets at the high end of the range may see more actions as they test
resistance levels numerous times.
Most 52-week strategies require some
technical analysis. Traders look for simple and complex patterns, open positions with stop losses, and target prices based on historical figures.
Limitations of the 52-Week Range Strategy
The 52-week range only tells you the past performance of an asset. It does not tell you about the factors driving such performance. For instance, if an asset loses 20% from its 52-week high and continues to drop, it is important to look at the news driving this trend. This information is not immediately apparent when looking at the
52-week highs/lows.
It is important to realize that the 52-week data cannot tell you anything about price relative to movement. You will need to investigate other metrics to get a clear picture. For instance, an asset that is trading way above its 52-week high cannot tell investors whether it is overvalued, undervalued or valued the right way. Just because it is above its 52-week high, it isn’t necessary that it is a good investment.