What Is the 52-Week Range?

The 52-week range is a data point traditionally reported by printed financial news media, but more modernly included in data feeds from financial information sources online. The data point includes the lowest and highest price at which a stock has traded during the previous 52 weeks.

Investors use this information as a proxy for how much fluctuation and risk they may have to endure over the course of a year should they choose to invest in a given stock. Investors can find a stock’s 52-week range in a stock’s quote summary provided by a broker or financial information website. The visual representation of this data can be observed on a price chart that displays one year’s worth of price data.

Understanding the 52-Week Range

The 52-week range can be a single data point of two numbers: the highest and lowest price for the previous year. But there is much more to the story than these two numbers alone. Visualizing the data in a chart to show the price action for the entire year can provide a much better context for how these numbers are generated.

Since price movement is not always balanced and rarely symmetrical, it is important for an investor to know which number was more recent, the high or the low. Usually an investor will assume the number closest to the current price is the most recent one, but this is not always the case, and not knowing the correct information can make for costly investment decisions.

Two examples of the 52-week range in the following chart show how useful it might be to compare the high and low prices with the larger picture of the price data over the past year.

These examples show virtually the same high and low data points for a 52-week range (set 1 marked in blue lines) and a trend that seems to indicate a short-term downward move ahead.

The overlapping range on the same stock (set 2 marked in red lines) now seems to imply that an upward move may be following at least in the short term. Both of these trends can be seen to play out as expected (though such outcomes are never certain). Technical analysts compare a stock’s current trading price and its recent trend to its 52-week range to get a broad sense of how the stock is performing relative to the past 12 months. They also look to see how much the stock’s price has fluctuated, and whether such fluctuation is likely to continue or even increase.

The information from the high and low data points may indicate the potential future range of the stock and how volatile its price is, but only the trend and relative strength studies can help a trader or analyst understand the context of those two data points. Most financial websites that quote a stock’s share price also quote its 52-week range. Sites like Yahoo Finance, Finviz.com and StockCharts.com allow investors to scan for stocks trading at their 12-month high or low.

Current Price Relative to 52-Week Range

To calculate where a stock is currently trading at in relations to its 52-week high and low, consider the following example:

Suppose over the last year that a stock has traded as high as $100, as low as $50 and is currently trading at $70. This means the stock is trading 30% below its 52-week high (1-(70/100) = 0.30 or 30%) and 40% above its 52-week low ((70/50) – 1 = 0.40 or 40%). These calculations take the difference between the current price and the high or low price over the past 12 months and then convert them to percentages.

52-Week Range Trading Strategies

Investors can use a breakout strategy and buy a stock when it trades above its 52-week range, or open a short position when it trades below it. Aggressive traders could place a stop-limit order slightly above or below the 52-week trade to catch the initial breakout. Price often retraces back to the breakout level before resuming its trend; therefore, traders who want to take a more conservative approach may want to wait for a retracement before entering the market to avoid chasing the breakout.

Volume should be steadily increasing when a stock’s price nears the high or low of its 12-month range to show the issue has enough participation to break out to a new level. Trades could use indicators like the on-balance volume (OBV) to track rising volume. The breakout should ideally trade above or below a psychological number also, such as $50 or $100, to help gain the attention of institutional investors.

What Is the 80-20 Rule?

The 80-20 rule, also known as the Pareto Principle, is a familiar saying that asserts that 80% of outcomes (or outputs) result from 20% of all causes (or inputs) for any given event.

In business, a goal of the 80-20 rule is to identify inputs that are potentially the most productive and make them the priority. For instance, once managers identify factors that are critical to their company’s success, they should give those factors the most focus.

Although the 80-20 rule is frequently used in business and economics, you can apply the concept to any field. Wealth distribution, personal finance, spending habits, and even infidelity in personal relationships can all be the subject of the 80-20 rule.

How Does the 80-20 Rule Work?

You may think of the 80-20 rule as simple cause and effect: 80% of outcomes (outputs) come from 20% of causes (inputs). The rule is often used to point out that 80% of a company’s revenue is generated by 20% of its customers.

Viewed in this way, it might be advantageous for a company to focus on the 20% of clients that are responsible for 80% of revenues and market specifically to them. By doing so, the company may retain those clients, and acquire new clients with similar characteristics. However, there’s a more fundamental meaning to the 80-20 rule.

Core Principle

At its core, the 80-20 rule is about identifying an entity’s best assets and using them efficiently to create maximum value. For example, a student should try to identify which parts of a textbook will create the most benefit for an upcoming exam and focus on those first. This does not imply, however, that the student should ignore the other parts of the textbook.

Misinterpretations

People may not realize that the 80-20 rule is a precept, not a hard-and-fast mathematical law. Furthermore, it is isn’t necessary that the percentages equal 100%. Inputs and outputs simply represent different units. The percentages of these units don’t have to add up to 100%. It’s the concept behind the rule that matters.

There’s another way in which the 80-20 rule is misinterpreted. Namely, that if 20% of inputs are most important, then the other 80% must not be important. This is a logical fallacy. The 80% can be important, even if the decision is made to prioritize the 20%.

80-20 Rule Background

The 80-20 rule is also known as the Pareto principle and is applied in Pareto analysis. It was first used in macroeconomics to describe the distribution of wealth in Italy in the early 20th century. It was introduced in 1906 by Italian economist Vilfredo Pareto, who is best known for the concepts of Pareto efficiency.

Pareto noticed that 20% of the pea pods in his garden were responsible for 80% of the peas. Pareto expanded this principle to macroeconomics by showing that 80% of the wealth in Italy was owned by 20% of the population.

In the 1940s, Dr. Joseph Juran, a prominent figure in the field of operations management, applied the 80-20 rule to quality control for business production.

He demonstrated that 80% of product defects were caused by 20% of the problems in production methods. By focusing on and reducing the 20% of production problems, a business could increase the overall quality of its products. Juran referred to this phenomenon as “the vital few and the trivial many.”

Benefits of the 80-20 Rule

Although there is little scientific analysis that either proves or disproves the 80-20 rule’s validity, there is much anecdotal evidence that supports the rule as being essentially valid, if not numerically accurate.

Performance results of salespeople in a wide range of businesses have demonstrated success by incorporating the 80-20 rule. In addition, external consultants who use Six Sigma and other management strategies have incorporated the 80-20 principle in their practices with good results.

Example of the 80-20 Rule

A Harvard graduate student, Carla, was working on an assignment for her digital communications class. The project was to create a blog and monitor its success during the course of a semester.

Carla designed, created, and launched the site. Midway through the term, the professor conducted an evaluation of the blogs. Carla’s blog, though it had achieved some visibility, generated the least amount of traffic compared with her classmates’ blogs.

Define the Problem

Carla happened upon an article about the 80-20 rule. It said that you can use this concept in any field. So, Carla began to think about how she might apply the 80-20 rule to her blog project. She thought, “I used a great deal of my time, technical ability, and writing expertise to build this blog. Yet, for all of this expended energy, I am getting very little traffic to the site.”

She now understood that even if a piece of content is spectacular, it is worth virtually nothing if no one reads it. Carla deduced that perhaps her marketing of the blog was a greater problem than the blog itself.

Apply the 80-20 Rule

To apply the 80-20 rule, Carla decided to assign her 80% to all that went into creating the blog, including its content. Her 20% would be represented by a selection of the blog’s visitors.

Using web analytics, Carla focused closely on the blog’s traffic. She asked herself:

• Which sources comprise the top 20% of traffic to my blog?
• Who are the top 20% of my audience that I wish to reach?
• What are the characteristics of this audience as a group?
• Can I afford to invest more money and effort into satisfying my top 20% readers?
• In terms of content, which blog posts constitute the top 20% of my best-performing topics?
• Can I improve upon those topics, and get even more traction from my content than I’m getting now?

Carla analyzed the answers to these questions, and edited her blog accordingly:

1. She adjusted the blog’s design and persona to align with her top 20% target audience (a strategy common in micromarketing).
2. She rewrote some content to meet her target reader’s needs more fully.

Significantly, although her analysis did confirm that the blog’s biggest problem was its marketing, Carla did not ignore its content. She remembered the common fallacy cited in the article—if 20% of inputs are most important, then the other 80% must be unimportant—and did not want to make that mistake. She knew it was necessary to address aspects of the content, as well.

Results

By applying the 80-20 rule to her blog project, Carla came to understand her audience better and therefore targeted her top 20% of readers more purposefully. She reworked the blog’s structure and content based on what she learned, and traffic to her site rose by more than 220%.