What Is the Importance of the 52-Week High & the 52-Week Low Prices?

Spread

Stock tables will show your stock's 52-week high and its 52-week low in dollar amounts. The difference between them is the "52-week spread." It's usually more informative to look at the spread in terms of percentage rather than raw dollars. For example, determine if $5 is a large spread. It depends on the figures at either end. If the stock traded at a high of $10 and a low of $5, than a $5 spread is enormous--it represents 100 percent of the low-end price and 50 percent of the high end. But if the stock traded at a high of $75 and a low of $70, then a $5 spread is much less remarkable: about 7 percent of both the low- and high-end prices.

Volatility

Knowing the 52-week high and low of a stock gives you a sense of how volatile the stock is. Volatility is essentially the stock's susceptibility to wide swings in price. For example, a stock that has a 52-week high of $26 and a 52-week low of $23 shows relatively little volatility, as the price hasn't moved more than about 10 percent. On the other hand, a stock with a 52-week high of $26 and a low of $13 has high volatility, with price swings of as much as 100 percent. Volatility can be both good and bad. You can make a lot of money fairly quickly on a volatile stock--but you can lose a lot of money on it just as quickly.

Trends

The stock's current price in relation to the 52-week high and the 52-week low also suggests the stock's trend line--where the price is going. If the price is squarely in the middle, it's more likely that the stock is at a stable price point. If it's near the 52-week high, that could suggest that the price is on an upswing--or that a sharp drop might be looming. A price near the 52-week low says the opposite: The stock may be a dog on its way down, or it may be a good value. Stock tables usually highlight which ones have reached new 52-week highs or lows.

Context

No number in a stock table is a complete story in itself. An investor's interpretation of the 52-week highs and lows takes into account not only the activity of the stock but also of the company behind that stock. One bad day--or one good day--could have produced a price spike that skewed the spread for the whole 52 weeks. Recent history also matters: Determine if the stock been steadily moving upward (or downward), or has it been bouncing up and down. Some stock tables also include a figure called year-to-date change, or YTD. This tells you how much the stock has moved just since Jan. 1; this offers a glimpse at volatility in a shorter time frame than the full 52-week range.