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5 Stock Insiders are Gobbling Up

Merrimack Pharmaceuticals

One biotechnology and drugs player that insiders are active in here is Merrimack Pharmaceuticals (MACK). This company is discovering, developing and preparing to commercialize innovative medicines paired with companion diagnostics for the treatment of serious diseases, with an initial focus on cancer. Insiders are buying this stock into weakness, since shares are off by 25% during the last three months.

Merrimack Pharmaceuticals has a market cap of $628 million and an enterprise value of $562 million. This stock trades at a premium valuation, with a price-to-sales of 13.72 and a price-to-book of 50.66. Its estimated growth rate for the next quarter is 86.4%, and for next year it's pegged 41.3%. This is a cash-rich company, since the total cash position on its balance sheet is $86.67 million and its total debt is zero.

A director just bought 36,500 shares, or about $247,000 worth of stock, at $6.77 per share.

From a technical perspective, MACK is currently trending below its 50-day moving average, which is bearish. This stock has been trending sideways for the last two months, with shares moving between $6.02 on the downside and $7.50 on the upside. A high-volume move outside of that range soon will likely lead to the next major trend for shares of MACK.

If you're bullish on MACK, then I would look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $6.89 to $7.50 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 752,939 shares. If that breakout triggers soon, then MACK will set up to re-test or possibly take out its next major overhead resistance levels at $8.50 to $9.65 a share. Any high-volume move above $9.65 will then put $11.11 into focus for shares of MACK.

AVEO Pharmaceuticals

Another name in the biotechnology and drugs complex that insiders are snapping up a decent amount of stock in is AVEO Pharmaceuticals (AVEO). This company is engaged in discovering, developing and commercializing novel cancer therapeutics. Insiders are buying this stock into extreme weakness, since shares are off by 60% so far in 2012.

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