Leading Stocks Can Rise Past New Highs

That's what IBD founder and Chairman William O'Neil calls the "great paradox." "What seems too high in price and risky to the majority usually goes higher, and what seems low and cheap usually goes lower," he wrote in "How to Make Money in Stocks."

Studies of stocks at new highs and lows showed those on the new-high list tended to go up in price.

That's why savvy investors focus on leading stocks that are at, or near, new highs. IBD offers plenty of candidates at or near new highs for readers to further research.

The new highs list (today on Page B4) is a good resource for, well, spotting new highs. It's on the Industry Groups page, directly below IBD's 197 Industry Group Rankings.

Since the stocks are trading at 52-week highs, many can be extended well beyond their ideal buy points. But in a healthy market, other stocks rally even higher.

The new highs list is arranged by broad sectors with the most new highs. Within each sector, stocks are listed by volume increase. Bold-facing highlights stocks with a 95 or better Earnings Per Share Rating.

Stocks in the list of 52-week lows generally are in weakening condition, and shouldn't be regarded as attractively priced.

Also check each day the NYSE and Nasdaq Stocks In The News sections. They feature one or two leading stocks that are near their ideal buy point 15r approaching record highs.

Still leery about buying a stock that's at new highs?

Precision Castparts (NYSE: - ) first entered new-high territory as it cleared a base in June 2004 (point 1).

The aerospace parts maker kicked off a string of steady double-digit profit growth starting in mid-2004.

The stock rose more than 15% to a new high to form a base-on-base pattern, which it cleared in early September (point 2). The stock's action also could have been properly interpreted as a pullback to its 10-week moving average.

Investors scared of buying at the top missed out on a 38% run to the week ended March 11, 2005 (point 3).

Four months later, the stock broke out of a new base (point 4) and to new highs again, rallying 35% to a late-September high.