It's a good time to be a shareholder in Reckitt Benckiser (LON:RB.): as the share approaches its 52-week high, holders may be wondering whether to sell and take the profit, or buy more and ride the uptrend.
Shares in Reckitt Benckiser are currently trading close to a 52 week high, with the share price up by around 12.8% to 7138 over the past month.
For investors holding the stock (or considering buying it), the question is: what now?
52-week highs are a popular market indicator. But research shows investors can be left wondering what to do when it happens when a 52-week high is hit. Here’s a primer on what the academic research says...
What happens when a share hits a new high?
52 week highs are always good news. But surprisingly, the prices of high performing shares can be slow to move when they publish positive earnings news.
Research shows this happens because investors are cautious about bidding high performing shares any higher (even if they deserve it). 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.
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.
A look at Reckitt Benckiser’s StockReport could offer more insight into what’s driving the momentum in its share price - and whether that might continue.
With Reckitt Benckiser 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.