With shares in Gaming Realms (LON:GMR) 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 26.9% over the past week. On a one-month basis, the Gaming Realms share price has risen by 33.0%. Will this continue however? We can briefly look at the psychology and research around 52-week highs.
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 Gaming Realms’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.
Disclaimer: These articles are provided for information purposes only. The content is not intended to be a personal recommendation. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. The author has no position in the stocks mentioned, unless otherwise stated.