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5 Stocks Insiders Are Snapping Up

Kingold Jewelry

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One final stock that has seen some decent insider buying is Kingold Jewelry (KGJI), which designs, manufactures and sells gold jewelry and Chinese ornaments in the People's Republic of China. Insiders are clearly finding some value here; the stock has dropped over 60% so far in 2011.

This company has a market cap of $81 million and an enterprise value of $76 million, and the stock trades at a very cheap trailing price-to-earnings of 3.79.

The CEO just bought 200,000 shares, or $312,900 worth of stock, at $1.43 to $1.60 per share. These stock purchases are part of a Rule 10b5-1 plan he entered into in early June to buy up to $500,000 worth of stock and then subsequently buy an additional $1 million worth of stock.

From a technical standpoint, this stock recently formed a perfect double-bottom chart pattern at $1.29 to $1.28 a share. Since hitting that bottom in late June, the stock has soared and hit a recent high of $1.70 a share.

If you want to buy this stock, I would wait until you see KGJI take out its 50-day moving average of $1.67 on strong volume. Look for volume that's well above the three-month average action of 171,800 shares. I would add to any long position aggressively if you see the stock take out $1.85 and then $2.11 a share. One could also buy the stock on weakness if it moves back towards some significant support at $1.40 a share.

To see more stocks with notable insider buying, including Aradigm (ARDM), Nanosphere (NSPH) and IVAX Diagnostics (IVD), check out the Stocks With Big Insider Buying portfolio on Stockpickr.

-- Written by Roberto Pedone in Winderemere, Fla.

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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to Beconequity.com and maintains the website Maddmoney.net, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.
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