Buying High the New Winning Investment Strategy?

Buying High the New Winning Investment StrategyWhen I evaluate potential stocks to trade, not only do I examine how well the company has done and delivered, but I also look at the stock’s chart potential and technical analysis.

In fact, I often will screen stocks based on my technical analysis system, and from there, I’ll take a closer look at the company’s underlying fundamentals. But the strategy I use for day trading and swing trading differ from the process I employ for longer-term buys.

For trading, I tend to rely on technical analysis more than I do for longer-term investments.

Stocks that I really like to look at are those trading at their 52-week highs. (Read “Denny’s Serves Up Grand-Slam Returns.”) Some of you might ask why I would bother to look at stocks that have already eclipsed their 52-week highs. The reason is that these stocks are trading at their highs, because they are delivering results to Wall Street. As a side note, I also look at stocks near their lows, but these are predominately viewed as contrarian picks.

An excellent example of a stock at a 52-week high that I suggested readers keep on their watch lists recently was Mannkind Corporation (NASDAQ/MNKD), a biopharmaceutical company that is making some great strides in developing therapeutic products for several diseases, including diabetes, cancer, and inflammatory and autoimmune diseases.

On the chart, Mannkind has made 26 new highs this year and has shot up 213% in that time, according to data from Barchart.com. Over the past year, the stock made 32 new highs and is up a sizzling 341%, based on my technical analysis.

Examining Mannkind’s stock chart through technical analysis, the company is excellent, showing successive highs this year, as indicated by the purple circle in the chart below.

The stock is pausing now, down eight percent from its high, so it may be taking a break. I would not be chasing the stock as the easy money has been made for now, based on my technical analysis.

MannKind Corporation Chart

Chart courtesy of www.StockCharts.com

In addition to Mannkind, there is always a good buying opportunity to make money when examining stocks trading at their 52-week highs through technical analysis.

I look for high volume stocks trading above their 50- and 200-day moving averages (MAs). You want to look for a possible “golden cross” pattern, in which the 50-day MA is above the 200-day MA, as shown in the chart of Mannkind below. You also want to see strong or rising relative strength and a bullish moving average convergence/divergence (MACD).

MannKind Corp Chart

Chart courtesy of www.StockCharts.com

Another stock on the rise is Novatel Wireless, Inc. (NASDAQ/NVTL), which jumped 7.71% on June 7 and is edging higher on the chart.

Novatel Wireless Inc Chart

Chart courtesy of www.StockCharts.com

Other potential candidates include MicroVision, Inc (NASDAQ/MVIS), Pacific Sunwear of California, Inc. (NASDAQ/PSUN), Flamel Technologies S.A. (NASDAQ/FLML), and TearLab Corporation (NASDAQ/TEAR).