The new high is an excellent gauge of strong demand. This is especially notable in times of weak ‘general’ market sentiment. As buyers are prepared to pay new high prices for a stock it is a strong indication they expect higher prices. If the price move to new highs is endorsed by expanding volume this is also a indication there is a strong possibility higher prices will follow. Why? Despite their being a plentiful amount of sellers, which is typical at price highs, the buyer’s ability to absorb this selling and still forge higher prices is a bullish sign.
These price levels usually attract high volatility as trader emotions often run high at these points so it is an essential part of any trading process to work with stops to control your risk to a predetermined amount.