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Which way to trade Iofina (LON:IOF)?

As any reader of this is probably aware, shares in Iofina (LON:IOF) are currently trading close to a 52 week high, with the share price up by around 10.5% to 23.8p over the past week. On a one-month basis, the Iofina price has risen by 20.3%.

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...

GET MORE DATA-DRIVEN INSIGHTS INTO LON:IOF »

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.

Why is this? Research shows investors become cautious about bidding their 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 and higher, as fear of missing out sets in.

A look at Iofina’s StockReport could offer more insight into what’s driving the momentum in its share price - and whether that might continue. What we do know however is that statistically speaking, prices continue to rise after a new 52-week high is hit – which may be a reason to hold-fire on any immediate plans to sell.

What does this mean for potential investors?

With Iofina trading close to a 52 week high, it’s possible that investors in the market are uncertain about where the price will move next. It's important to remember that momentum on its own is no guarantee of future returns.

To get a better idea about whether this trend will continue, it's worth doing some investigation yourself. Indeed, we've identified some areas of concern with Iofina that you can find out about here.