New Highs

Today I'm going over a simple screen with a powerful concept:

I know some are reluctant to buy stocks making new 52-week highs. If you're one of them, have you ever asked yourself why?

If a stock is making a new 52-week high, isn't that a good thing? Just like a stock making a new 52-week low is a bad thing.

I'm pretty sure that a person who dislikes buying stocks making new 52-week highs wouldn’t be too upset if the stock he already owned broke out to a new 52-week high.

And why should he? Statistics have shown that stocks making new highs have a tendency of making even higher highs.

These are the stocks we all dream about being in. Get in and it keeps going up.

Of course the fundamentals need to be there. And you should keep a watchful eye on valuations. But if you were in a stock making new highs and cheering it on, it seems silly to be afraid of one doing the same just because you haven't bought it.

One question I like asking myself just to put things into perspective is: If I was in it, would I be excited and would I still want to be in it? If the answer is yes, then I'll look for the best opportunity to get in.

If the answer is no, I'd want to take profits, then I'll move on.

This topic actually reminds me of a question someone asked me a while ago about a stock I was talking about that was at a new 52-week high. In fact, it was at a 5-year high.

He asked, "Aren't you worried about buying a stocks at a 52-week high?" I said of course not. So it just made a new 52-week high. That's great news. Guess what - last year it made a new 52-week high as well. And the year before that. And the year before that.

Can you imagine all the money you'd be leaving on the table if you were afraid of being in stocks every time they made a new high?

Case closed.

:)

The screen I'm running today looks for:

• Stock trading within 5% of their 52 week high
  The expression looks like this:

  Current Price/52 Week high greater than or equal to .95

  That means these stocks are either at a new 52-week high, have just hit it and are still trading within 5% of it, or are climbing towards their 52-week high and are within striking distance.

• Zacks Rank less than or equal to 2
  Only Zacks Strong Buys and Buys.

• Price to Sales less than or equal to 1
  A Price to Sales ratio of 1 means you're paying $1 for every $1 of sales a company makes. A P/S ratio of less than 1 means you're paying less than $1 for every $1 of sales a company makes. I have found that by looking at stocks with a P/S ratio of less than or equal to 1 helps me find stocks that are still considered undervalued -– even if they are making new highs.

• Current Avg. 20 Day Volume > Previous week's Avg. 20 Day Volume
  In short, this helps me find stocks with volume that has increased in the recent week vs. the previous week. If the price is climbing on increased volume, that shows increased demand or buying coming in. And the more buying demand there is for a stock, the more it should climb.

• All of these parameters are applied to stocks with prices greater than or equal to $5 and with avg. daily volume of greater than or equal to 100,000.

Here are 5 stocks that made it thru this week's screen for 3/30/10:

BGS - Snapshot Report B&G Foods, Inc.
FUL - Snapshot Report H.B. Fuller Co.
OLN - Snapshot Report Olin Corp.
PPG - Analyst Report PPG Industries, Inc.
TSN - Analyst Report Tyson Foods, Inc.

Sign up now for your 2-week free trial to the Research Wizard and get the rest of the stocks on this list. Start using this screen in your own trading. Or create your own strategies and test them before you invest. Know what to buy and when to sell.

Get started with your free trial now.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: http://www.zacks.com/performance.

Read the full analyst report on TSN

Read the full analyst report on OLN

Read the full analyst report on FUL

Read the full analyst report on PPG

Read the full analyst report on BGS