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As Gear4music Holdings hits a yearly high, is it too late to buy shares?

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With shares in Gear4music Holdings (LON:G4M) currently trading close to a 52 week high, a question many on the sidelines probably have is: "was I too late to buy them"?

The share price is up by around 4.55% over the past week. On a one-month basis, the Gear4music Holdings share price has risen by 43.8%. Will this continue however? We can briefly look at the psychology and research around 52-week highs.

GET MORE DATA-DRIVEN INSIGHTS INTO LON:G4M »

Do prices tend to continue rising after a 52-week high is hit?

52 week highs are always good news. But, surprisingly, research shows investors become hesitant about bidding their high performing shares any higher – even with further positive earnings news.

Psychologists call this anchoring. As humans, we tend to take our time when it comes to changing our opinions in the face of new information - even when it's good news. We become 'anchored' to the new price and cannot easily fathom a reality in which it could get any better.

This emotional tug-of-war often ends with the ‘new high’ stock drifting higher in price over the coming weeks and months. The upward trend is called “post earnings announcement drift”. As the news sinks in, momentum takes over and the price moves higher and higher (as fear of missing out sets in).

A look at Gear4music Holdings’s StockReport could offer more insight into what’s driving the momentum in its share price. Any sensible investor would want to see strong solid fundamentals to the stock, rather than relying on just a 52-week high to make a decision on it.

Next steps

With Gear4music Holdings trading close to its 52 week high, it’s possible that investors in the market are uncertain about whether to buy, hold or sell it. This uncertainty can cause erratic pricing in the short-term before momentum takes over - and it’s worth considering this before making your own trading decision.

To find more stocks that are trading close to their 52 week highs, you can explore this constantly updated 52 Week Highs screen, which covers all the ‘new highs’ in the market.

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