Here's a technical look at how to trade five stocks that have seen recent insider buying.
Corporate insiders sell their own companies' stock for a number of reasons.
They might need the cash for a big personal purchase such as a new house or yacht, or they might need the cash to fund a charity. Sometimes they sell as part of a planned selling program that they have put in place for diversification purposes, which allows them to sell stock in stages instead of selling all at one price.
Other times they sell because they think their stock is overvalued and the risk/reward is no longer attractive. Some even dump their own stock because they have inside knowledge that a competitor is eating their lunch and stealing market share.
But insiders usually buy their own shares for one reason: They think the stock is a bargain and has tremendous upside.
SMALL INVESTMENT, BIG POTENTIAL. TheStreet's Stocks Under $10 has identified a handful of stocks with serious upside potential. See them FREE for 14-days.
The key word in that last statement is "think." Just because a corporate insider thinks his or her stock is going to trade higher, that doesn't mean it will play out that way. Insiders can have all the conviction in the world that their stock is a buy, but if the market doesn't agree with them, the stock could end up going nowhere. Also, I say "usually" because sometimes insiders are loaned money by the company to buy their own stock. Those loans are often sweetheart deals and shouldn't be viewed as organic insider buying.
Stocks with notable insider activity is something that I tweet about on a regular basis. These are also the exact type of stocks that I love to trade and alert in real-time.
At the end of the day, it's institutional money managers running big mutual funds and hedge funds that drive stock prices, not insiders. That said, many of these savvy stock operators will follow insider buying activity when they agree with the insider that the stock is undervalued and has upside potential. This is why it's so important to always be monitoring insider activity but twice as important to make sure the trend of the stock coincides with the insider buying.
Recently, a number of companies' corporate insiders have bought large amounts of stock. These insiders are finding some value in the market, which warrants a closer look at these stocks.
Medicines Company
Another health care player that insiders are active in here is Medicines Company (MDCO) , which provides medicines for patients in acute and intensive care hospitals worldwide. Insiders are buying this stock into strength, since shares have spiked higher by 19.7% over the last three months.
The vice president just bought 45,985 shares, or about $1.74 million worth of stock, at $37.22 per share.
From a technical perspective, Medicines Company is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong over the last five months, with shares moving higher off its low of $27.50 a share to its recent high of $39.08 a share. During that uptrend, this stock has been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of Medicines Company within range of triggering a near-term breakout trade.
If you're bullish on Medicines Company then I would look for long-biased trades as long as this stock is trending above its 50-day moving average of $35.61 a share or above more near-term support at $34 a share and then once it breaks out above some near-term overhead resistance levels at its 20-day moving average of $37.21 a share to $39.08 a share and then above some past resistance at $40 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 971,683 shares. If that breakout fires off soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $43 to $43.78, or even north of $45 a share.
Valeant Pharmaceuticals
One health care player that insiders are jumping into here is Valeant Pharmaceuticals (VRX) , which develops, manufactures, and markets pharmaceuticals, over-the-counter products, and medical devices worldwide. Insiders are buying this stock into huge weakness, since shares have plunged by 78.3% over the last six months.
Valeant Pharmaceuticals has a market cap of $8.1 billion and an enterprise value of $38.9 billion. This stock trades at a cheap valuation, with a forward price-to-earnings of 2.99. Its estimated growth rate for this year is -34.5%, and for next year it's pegged at 20.8%. This is not a cash-rich company, since the total cash position on its balance sheet is $1.33 billion and its total debt is 31.98 billion.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks with serious upside potential in the next 12-months. Learn more.
If you're bullish on Valeant Pharmaceuticals, then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $23.13 to $$22.52 a share and then once it breaks out above some near-term overhead resistance levels at $25.50 to its 20-day moving average of $26.59 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average volume of 37.77 million shares. If that breakout triggers soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day moving average of $29.95 to $30.95 a share.
Cheniere Energy
One energy player that insiders are loading up on here is Cheniere Energy (LNG) , which engages in the liquefied-natural-gas-related business in the U.S. Insiders are buying this stock into notable weakness, since shares have fallen by 16.9% over the last six months.
Cheniere Energy has a market cap of $7.6 billion and an enterprise value of $24.7 billion. This stock trades at a premium valuation, with a forward price-to-earnings of 92. Its estimated growth rate for this year 62.8%, and for next year it's pegged at 121.9%. This is not a cash-rich company, since the total cash position on its balance sheet is $1.10 billion and its total debt is $18.42 billion.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks with serious upside potential in the next 12-months. Learn more.
From a technical perspective, Cheniere Energy is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock is spiking higher on Wednesday right off some near-term support at $31.87 a share. That spike is starting to push this stock within range of triggering a near-term breakout trade above some key overhead resistance levels.
If you're in the bull camp on Cheniere Energy, then I would look for long-biased trades as long as this stock is trending above some near-term overhead resistance levels at $31.87 to $31.02 a share and then once it breaks out above its 20-day moving average of $33.73 a share and its 50-day moving average of $35.22 a share with volume that hits near or above its three-month average action of 2.39 million shares. If that breakout develops soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $38.15 to its 200-day moving average of $39.66, or even north of $40 a share.
JMP Group
One financial player that insiders are loading up on here is JMP Group (JMP) , which provides investment banking and asset management services in the U.S. Insiders are buying this stock into modest strength, since shares have risen by 8.4% over the last three months.
JMP Group has a market cap of $115 million and an enterprise value of $1.05 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 34 and a forward price-to-earnings of 8.5. Its estimated growth rate for this year is -5.5, and for next year it's pegged at 23.1%. This is not a cash-rich company, since the total cash position on its balance sheet is $81.26 million and its total debt is $1.01 billion. This stock currently sports a dividend yield of 6.6%.
The CEO just bought 489,221 shares, or about $2.60 million worth of stock, at $5.33 to $5.41 per share.
SMALL INVESTMENT, BIG POTENTIAL. TheStreet's Stocks Under $10 has identified a handful of stocks with serious upside potential. See them FREE for 14-days.
From a technical perspective, JMP Group is currently trending above its 50-day moving average and just below its 200-day moving average, which is neutral trendwise. This stock has been uptrending over the last five months, with shares moving higher off its low of $4.81 a share to its recent high of $5.61 a share. During that uptrend shares of JMP Group have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed this stock within range of triggering a near-term breakout trade.
If you're bullish in JMP Group, then I would look for long-biased trades as long as this stock is trending above its 20-day moving average of $5.35 a share or above its 50-day moving average of $5.22 a share and then once it breaks out above some near-term overhead resistance levels at $5.51 to $5.61 a share and then above more key resistance at $5.71 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 46,919 shares. If that breakout fires off soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $6 to $6.22, or even $6.36 to $7 a share.
Brink's
My final stock with some big insider buying is security and protection services player Brink's (BCO) , which provides secure transportation, cash management services, and other security-related services worldwide. Insiders are buying this stock into modest weakness, since shares have fallen by 4% over the last three months.
Brink's Company has a market cap of $1.4 billion and an enterprise value of $1.7 billion. This stock trades at a reasonable valuation, with a forward price-to-earnings of 13.5. Its estimated growth rate for this year is 13.6%, and for next year it's pegged at 12.5%. This is not a cash-rich company, since the total cash position on its balance sheet is $186.80 million and its total debt is $494.60 million. This stock currently sports a dividend yield of 1.3%.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks with serious upside potential in the next 12-months. Learn more.
From a technical perspective, Brink's Company is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been trending sideways over the last month and change, with shares moving between $28.07 a share on the downside and $30.58 a share on the upside. Any high-volume move above the upper-end of its recent sideways trending chart pattern could trigger a big breakout trade for shares of Brink's Company.
If you're bullish on Brink's Company, then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $28.79 to $28.07 a share and then once it breaks out above its 200-day moving average of $29.86 a share to $30.58 a share and then above its 50-day moving average of $31.06 a share with volume that hits near or above its three-month average action of 277,553 shares. If that breakout hits soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $33 to $34, or even $35 a share.
By Roberto PedoneSource:https://www.thestreet.com/story/13609004/6/insiders-are-scooping-up-shares-of-these-5-stocks.html
No comments:
Post a Comment