The 52 week high breakout strategy is a popular way to trade stocks that are making new highs. The idea behind this strategy is that when a stock breaks above its highest price in the past year, it signals a strong bullish momentum and a potential for further gains.
What Is the 52 Week High Breakout Strategy?
The 52-week high breakout strategy is based on the assumption that stocks that make new highs tend to continue rising, as they attract more buyers who are willing to pay higher prices. This results in a positive feedback loop that drives the stock price ever higher.
The 52 week high breakout strategy involves buying stocks that have closed above the highest price level in last 52 weeks, which is the highest price that the stock has traded at in the past year. The 52-week high acts as a resistance level that prevents the stock from moving higher. Once the stock breaks above this level, it indicates that the resistance has been overcome and that there is more room for upside.
This breakout strategy can be applied to any tradable instrument that has enough liquidity and volatility to cause significant price movements. However, depending on their characteristics and trends, some markets may be more suitable for this strategy than others.
Growth stocks, for example, are often good candidates because they are stocks of companies with high earnings growth potential. These stocks have strong momentum and can experience large price increases when they break out of their 52-week highs.
How to Scan Stocks 52 Week High breakout stocks with a scanner?
Scanner Link: https://public.streak.tech/in/gyvOmhhxSG
We can use the scanner available on Streak platform to scan for stocks breaking out of their 52 week high. Along with the breakout condition, we can add additional conditions as well. For eg. We can find out stocks breaking out of 1 year high with increasing volume, or 1 year high breakout stocks with RSI lower than 70 etc. If you need help with creating customized scanners, you can reach out to us at [email protected].
We can even deploy the scanner live so that it sends us notifications whenever any stock breaks out of this level.
52 Week high breakout strategy Backtesting
With the help of the Streak platform, we can easily backtest the 52 week high breakout strategy. We will take a sample strategy and learn how to backtest the strategy.
Strategy Link: https://public.streak.tech/in/iBzenDQuER
Sample Strategy Details:
Entry: Buy when a stock crosses above the highest high made in last 250 days (As there are approximately 250 trading sessions in 52 weeks)
Exit: 15% Stoploss and 30% Target
You can check the strategy, modify the conditions as per your requirement, add new stocks and run the backtest again.
Conclusion
Finally, the 52-week high breakout strategy is a popular way to trade stocks that are setting new highs. The strategy is based on the premise that stocks that surpass their highest price in the previous year tend to rise further and attract more buyers, creating a positive feedback loop. The strategy can be applied to any market or asset class that has enough liquidity and volatility to cause significant price movements. Furthermore, we can use the Streak platform’s scanner to look for stocks that have broken out of their 52-week highs and even deploy it live to receive notifications whenever a stock does. We can easily backtest the 52-week high breakout strategy using the Streak platform.
You may also like reading: Breakout Trading for Intraday
FAQs
The 52-week high breakout strategy is a popular trading strategy based on buying stocks that have broken above their highest price in the past year.
The strategy assumes that stocks that make new highs tend to continue rising due to increased buying activity, creating a positive feedback loop that pushes the stock price higher.
You can use a stock scanner like the one available on the Streak platform, which allows you to customize your scanning conditions based on various technical indicators.
you can backtest the strategy on the Streak platform. It lets you easily create and backtest your strategies without coding.
Disclaimer: The information provided is solely for educational purposes and does not constitute a recommendation to buy, sell, or otherwise deal in investments.
