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The stock market has been a fortune changer for numerous investors worldwide; some have seen their wealth rise manifolds, while others have experienced declining to pennies. It is difficult to predict how the stock may perform in the next few days. Although we have various indicators, they are often limited in approach and may not give 100% accurate results. Nevertheless, some of the indicators may confuse you by providing mixed indications.
As an investor, the stock market appears to be a paradise; you can invest your money in a low-lying stock, and once it rises, you get your money back with tons of profits. The simplest profit-making strategy is “buy low and sell high.” But how do we know the lowest price a share can go?
Every stock establishes some resistance and supports throughout its price performance in the market. These price points indicate whether you should buy a share or not. However, sometimes, a share may fall below its support, and an investor ends up losing their investment.
Investors wish to be certain about their purchase and don’t want it to end in ruins. Thus, they want the share to be at its lowest price, so it has only one way to go. To achieve their goal, investors use 52-week low statistics before buying stocks. It helps them locate profitable shares without the use of complex indicators. Are you an investor looking to boost your returns?
Then, this blog is for you; we will talk about everything you need to know about 52-week low stocks and how you can benefit from them. We have Ezekiel Chew with us to share his take on the subject. He has been working as a trading coach for over a decade and has made a name for his expertise worldwide. He will help us understand the subject in detail. Let’s go!
What are 52-week Low Stocks?
Buying low and selling high has been the primary tactic for best investors. A share trading at its lowest value has only one to go- upwards; the low value indicates a higher chance of profit.
A year in the stock market is full of uncertainties; there will be extraordinary rises and massive falls; a share would rarely maintain its value throughout the year, and considerable movements will create chances for investors to make a profit.
The 52-week low is the lowest price for a share in the past 52 weeks or a year. It highlights the share’s downfall and indicates a future rise. On the contrary, a 52-week high is the highest price in the past year. Investors purchase additional stocks when a share falls to its 52-week low and sell them when it nears its 52-week high.
Usually, it is difficult for general investors to risk their money on a falling stock; they fear a further fall may cause massive fluctuations in the company’s operations, and it may even fail to exist, meaning their investment is burned. Hence, smart money comes into action, and institutional investors mainly create the share rise. They help the share rise back to a high and then sell it for a profit.
Why are 52-week Low Stocks Important
Alphabet Inc. is an American company that previously traded as Google. We all know the importance of Google in reshaping the world and how lucrative its share is. Alphabet Inc’s share declined to its 52-week low on 24th May 2022.
The share traded at $2800 on 1st April, but after a series of consistent falls, it clocked $2116. The 52-week low indicated a future rise in the stock’s price. And that’s what happened, Alphabet Inc rose by more than 10% in the next few days, and the stock price rose to about $2400 on 1st June.
When an established company hits a low, it is bound to rise back. There are rare instances of a company failing the bounce and quitting its operations. The board of directors is quick to note the stock’s performance, and managers are under heat to keep the stock from falling any further. Hence, investors can enter stocks trading at 52 weeks’ low without worrying about possible falls.
The 52-week low establishes a threshold for investors to buy; it is where most investors would put a buy order, mainly due to the predictability of a share rising back. On the contrary, a sell-order is placed at the 52-week high or other resistance points to make the most of the share’s rise.
Nonetheless, 52 weeks low isn’t always as exciting as it may seem. Sometimes, microchip stocks may even go into bargained purchase or liquidation after dropping to a low value. It is important to uncover why the stocks fall to their lowest value.
Reasons behind 52 week’s Low for a Stock
The 52-week low is a result of a company’s poor performance. Any factors that may cause problems for a company result in its stock’s devaluation. A common reason for the 52-week low is a decline in the company’s profitability.
According to a report, 75% of NYSE investors don’t trade daily, and they are long-term investors. These investors only benefit from a high dividend yield; if a company goes in loss, it fails to pay any dividend, and the investors take note of it.
In reply, they would start selling their stock, resulting in a decline in the stock price. Another probable reason for the 52-week low is the accumulation of debt. Most companies fail to function profitably under huge debt.
Although debt provides tax leverage for companies, it also creates interest expense, reducing profitability. Sometimes, the debt compilation may rise enormously, causing difficulty for its repayment. Hence, the company may have to liquidate a part of it to fund back. It is dangerous for investors, who may look for a way out, causing the price to fall.
Nonetheless, a stock won’t always hit its lowest due to abnormal company operations. Instead, it can be a result of stock splits. A company may have to improve the marketability of its shares to raise additional capital; thus, it would have to create a stock split.
A stock split doesn’t change the company’s equity funds but increases the number of outstanding shares. Berkshire Hathaway shares used to trade at $432000, and we’re nowhere near the average investor’s investment. Hence, they announced a 2-for-one stock split, causing the value to halve. It leads to an improvement in share marketability.
Should you buy Stocks near the lowest price
Stock purchase decisions are often tricky; it may require Warren Buffet’s wisdom to analyze the turning point of a stock. From an investor’s viewpoint, a 52-week low may worsen further if the company can’t take corrective measures. With every falling stock, there are fair chances of failing in the short run. Hence, it is important to understand which stock is a better deal.
Stock prices move in phases; every phase lasts for about three months before changing. It is usually how the smart money causes the price to move. Once the stock falls to its 52-week low, the buy orders create a demand, and the stock price rises.
After a series of purchases, smart money owns the majority of shares at the low point, and the market sentiment improves. The share price skyrockets, and general investors come into play.
It is usually the case with blue chip stock; established companies don’t usually default on payments, and the share price decline is a result of changes in operations and rumors. There are more chances of the stock rising to its mean than falling further.
Hence, a purchase decision may yield great results if you are trading in fortune 500 and can locate a low-lying stock. You need to be careful with microchips, as these companies may fail to create a rebound and default.
Strategies when the Stock Price nears 52-week low
52 weeks low and high have always been popular trading thresholds for traders; a stock sees rapid changes aftermarket makers play their cards to improve their profits. As a general investor, you need to make the most of the changing points.
The first step is to use stock screeners to monitor changes in stocks. You should start with the fortune 500 companies and trace their trend. If a stock is nearing its all-time low, it is the stock to go for.
You’ll find several stocks fitting your filter; thus, it is important to create a watchlist for them. Once you find a stock at its 52-week low, add it to the watchlist to keep a close eye on it.
Once you have substantial companies on your watchlist, understand why they are trading at their lowest in the next step. It is better to go for companies with solvable problems. A change in directorship is easier to digest for the market than cash flow problems.
Lastly, shortlist your preferred stocks and enter the market. You should pay heed to the average volume traded in the stock. If the percent change in volume is significant, it highlights a possible rise.
It may take some time for the corrective measure to occur; till then, wait for it. The stock market is a game of patience; you need to use your intellect and sources to find stocks for trading purposes. If your brokerage doesn’t offer positive indicators, you can use a free account for other trading websites.
Best 52-Week Low Stock
Currently, the stock market has seen multiple stocks fall to their 52-week low. It is probably the right time to buy these stocks for a bargain. Wix has seen a gradual decline in its profitability over the last quarter, resulting in low investor confidence.
Many investors have started selling their stocks, causing the share to stoop to its all-time low. Investors fear the rising competition in technology markets may be difficult for Wix to handle. Hence, the low might be the fate of the business.
Nonetheless, Wix has been providing website services for several years and has made a name for itself. The customer reputation and aggressive marketing tactics shall see the company regain its throne sooner than investors expect. It is a good company to invest in.
Similarly, Spotify technology is also trading at a low point. The prices have fallen rapidly over the last year. The main concern area was the slow growth in the Indian subcontinent. The company has found it difficult to convince people of its premium membership, which is its main revenue source.
However, with the latest change in tactics, investors believe that a probable rise is on the cards, and soon, we will see the stock back at its mean.
Surprisingly, Amazon Inc has also failed to live up to its previous growth. The share has been trading at a low price. Part of it is due to rising inflation and gasoline prices across the United States. People have reduced their purchases, and Amazon is incurring high delivery costs. Investors expect things to improve as soon as the prices return to normal and habits change.
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Conclusion: 52-Week Low Stocks
The stock market isn’t gambling; while you may make good decisions by fluke, a lack of technical education will only result in long-term failure. The 52-week low is a fantastic strategy that has been popular amongst regular traders. It acts as firm support for stock price, and the value is supposed to rise from there.
Hence, traders investing at the price point end up with profitable returns without risking their investment. Nonetheless, a 52-week low can backfire if the company suffers from fundamental problems. It gets difficult to bounce back from the situation, and many investors have had terrible losses in some cases. You need to learn more than just the company name before giving it a watchlist add.
Earning in the stock market is difficult, but it gets even more challenging if you aren’t equipped with the latest techniques. The best way to begin trading is by educating yourself with the right coaches and courses. Take slow steps and pay importance to learn about the market. Small losses, in the beginning, can turn into profits if you understand the right lessons from them.
52-week Low Stocks FAQs
What stocks are trading at 52-week lows?
Stocks change quicker than you think. While some stocks are trading at a low right now, they might be soaring high when you read the blog. Currently, various popular companies have faced a decline in their stock price over the last year. It is mainly due to rising inflation in the US; however, as economic conditions improve, we will see the shares rising back. Here are some companies that are on most market makers watchlist:
- Amazon.com Inc
- Spotify Technologies
- Wix.com
- Alphabet Inc
- Meta Inc.
Is 52-week low stock risky?
Practically, no stock is free from risk; all investments have an inherent risk, and the stock market is no different. You need to play safe cards to ensure profitability with consistent returns. The 52-week low indicates the lowest price of a stock in the past year. If a stock is trading at its 52 weeks now, there is a fair chance of it moving upwards.
However, if the decline was due to a fundamental problem, the rise may not come until the problem has been fixed. You need to follow the strategies mentioned in the blog to find the right stocks to invest your hard-earned investments.