Momentum & the 52-Week High

Key term: momentum

Stocks that have been trading near their highest price of the past year have, by definition, been rewarded by the market lately — something about the story has kept buyers willing to pay up. That tendency for a moving stock to keep moving in the same direction is called momentum.

Momentum can behave in two very different ways. Sometimes it continues: a stock near its highs keeps climbing because whatever has been driving it hasn't run out of steam yet. Other times it snaps back: a stock that has run up quickly attracts investors looking to lock in gains, and the price pulls back even without any bad news at all.

One of the fastest ways to get a read on momentum is to check how far a stock's latest closing price sits below its 52-week high — the highest closing price it has reached over the past year. A stock sitting only a few percent below its high has strong, current momentum behind it; a stock sitting far below its high has been out of favor for a while, for reasons that may or may not still apply.

Neither position guarantees anything about today's game specifically — momentum can continue or reverse on any given day — but it's a useful, quick signal about which company currently has the market's confidence, and which one has ground to make up.

In the daily game

The "vs 52-Week High" metric in Game-Day Setup is exactly this reading — check which company is closer to its high before your next pick.