By Stockpickr Staff
Posted on June 29, 2009

When a stock hits a new high, like a new 52-week high or a new all-time high, many investors will quickly get interested and start to take notice. This happens for some very good reasons.

First of all, a stock hitting new highs is a clear example of strength, and when you’re investing in the stock market, it’s always a good idea to own stocks that are strong and displaying strength. It shows that the stock is in high demand and that big money (institutional investors) is supporting the price and snapping up shares at any cost.

Another great reason that can lead to new highs for a stock price is that a company's strong fundamental backdrop is causing its price to surge. We saw this in companies such as Netflix (NFLX) and Green Mountain Coffee Roasters (GMCR) this year. Both firms were growing sales at extremely high rates, especially high for a period of poor economic growth. As these firms grew their sales at more than 20%, the stocks followed suit and rose to new highs, helping anyone invested in the stocks make a pile of money.

It's also worth noting that both of these stocks were heavily shorted, and as the bears were squeezed out of their positions, it helped push them to levels they probably wouldn’t have reached otherwise.

The really great thing about stocks hitting new highs is that it often means shares are heading much higher. Just take a look at how Diedrich Coffee (DDRX) and Stein Mart (SMRT) preformed after these stocks started showing up on the new-high list. Diedrich Coffee is up over 900% year-to-date, and Stein Mart is up over 630%. For those watching the new-high list, it was very possible to catch these stocks early in their moves and profit handsomely as they soared. It’s possible on pullbacks that these stocks could still be very good buys and still be on their way toward much higher prints. That’s the beauty of a new high: It’s usually a recipe for more new highs!

According to Jim Cramer, a stock can also make a new 52-week high if the company operates in a niche market. Cramer mentioned on a recent “Mad Money” episode that Schweitzer Mauduit (SWM) and Compellant Technology (CML) operate in niche markets and are making new 52-week highs because both companies have a history of beating earnings and of under-promising and over-delivering when they report numbers.

The reason a stock makes a new high isn’t always the most important thing to focus on. From a technical perspective, what’s important is that the stock is trending in the right direction, with the opportunity for shareholders to enjoy the ride.

With this in mind, let’s take a look at a few stock charts that are at or near new highs that could be setting up to move even higher.

1. ClickSoftware Technologies

One stock that is showing up on the new-high list is ClickSoftware Technologies (CKSW), a provider of workforce and service management software products and solutions.

Check out this chart below, and you’ll see that this stock is within one point of some serious resistance at around $6.70 to $7 a share. The last two times the stock has hit these levels it has subsequently fallen significantly.

What's key to know about ClickSoftware is that if the stock can take out those levels and trade through $7.62 (its all-time high), it would set up the stock to make new all-time highs. This means that anyone who has ever bought the stock would be making money.

Inventors who are bullish on ClickSoftware might want to either let the stock pull back before getting long or wait for the stock to take out the overhead resistance mentioned above. Either way, this stock is clearly in bull mode and looks to be heading much higher!



2. Avanir Pharmaceuticals

Next up on the new-high list is Avanir Pharmaceuticals (AVNR), which focuses on developing, acquiring and commercializing therapeutic products for the treatment of chronic diseases. Chronic disease stocks have been getting a lot of attention of late as investors in Hemispherx Biopharma (HEB) await the FDA announcement for the potential approval of its lead chronic disease drug Ampligen.

Looking at the chart below, you’ll see that shares of Avanir are approaching some previous resistance at around $2.84 a share. This is very important price level when you consider that the last time the stock hit $2.84, it fell all the way down to 23 cents a share. If the stock can manage to trade above $2.84, it could be setting up to make a run back toward $4.

The stock is currently overextended and is most likely due for a pullback that could take shares back down to $1.70. However, on any pullback, it might be well worth it to buy shares and anticipate the breakout. Volume continues to be strong for Avanir with a number of up days recently clocking in at over 1 million shares vs. the average daily volume of 340,000.



3. Dollar Thrifty Auto Group

Another name that is entering the land of new highs is Dollar Thrifty Auto Group (DTG). This company is engaged in the business of daily rental of vehicles to business and leisure customers through company-owned stores.

Check out this chart below, and you’ll see that Dollar Thrifty has made a remarkable run up to $13 a share after forming a double bottom pattern at around 60 cents a share. The stock now looks ready to make a run at some previous resistance at around $15 to $17.50 a share. If the stock can take out those levels, it could be setting up to make a move back towards $26 a share.

The great thing about Dollar Thrifty is that from $17 to $26, there is almost no resistance for the stock. This means a breakout could send shares very quickly toward $26.

The stock is also being helped by some bullish news from its competitor Hertz Global Holdings (HTZ). Last Thursday, Hertz issued an earnings outlook that exceeded Wall Street expectations. This demonstrates that the fundamental picture for the car rental business could be rapidly improving.

Keep in mind that more 15% of Dollar Thrifty's float is currently sold as of June, so on any new highs, the bears will feel increased pressure to cover their short positions and squeeze the stock higher.



4. American Capital Agency

Also making new highs is American Capital Agency (AGNC). This company is a real estate investment trust that earns income primarily from investing in single-family residential mortgage pass-through securities and collateralized mortgage obligations.

Looking at the chart below, you can see that American Capital has been doing nothing but making higher highs and higher lows since July of 2008, which marks some very bullish technical price action. The stock has now officially broken out to brand new all-time highs after shares blasted through $20.50. This breakout was accompanied by heavy volume that clocked in at well above the average daily volume of 181,000 shares.

Currently the stock looks a bit overextended and probably needs some time to digest gains. However, if it can hold above the breakout level of $20.50 and you can catch it on a pullback toward $21 or $22, it could make for a great buy entry.

It’s also worth noting that the stock has a great dividend yield of 25.1%, and the company just declared a second-quarter dividend of $1.50.



Visit the Charts of the Week portfolio to learn about a few more stocks that are making new highs.

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