Rosetta Stone

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One stock that insiders are active in here is Rosetta Stone ( RST), which develops, markets and sells language learning solutions consisting of software, online services and audio practice tools primarily under its Rosetta Stone brand. Insiders are buying this stock into some incredible strength, with shares up over 80% so far in 2012.

Rosetta Stone has a market cap of $292 million and an enterprise value of $173 million. This stock trades at a premium valuation, with a forward price-to-earnings of 55. Its estimated growth rate for this year is 70.2%, and for next year it's pegged at 189.3%. This is a cash-rich company, since the total cash position on its balance sheet is $118.48 million, and its total debt is zero.

A director just bought 30,000 shares, or around $419,000 worth of stock, at $13.96 per share.

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From a technical perspective, RST is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the past six months, with shares soaring from a low of $6.76 to a recent high of $14.69 a share. During that move, shares of RST have consistently made higher highs and higher lows, which is bullish technical price action. That move has pushed the stock within range of triggering a near-term breakout trade.

If you're bullish on RST, then I would look for long-biased trades once this stock triggers a break out above some near-term overhead resistance at $14.69 a share with high volume. Look for volume on that move that's near or above its three-month average action of 104,706 shares. Another way to play RST is to buy it off support at around $13.50 to $12.50 a share, and then add to the trade once it takes out $14.69 with volume.

I would simply avoid RST or look for short-biased trades if it fails to trigger that breakout, and then drops below support at $12.50, and its 50-day moving average of $11.92 a share with high-volume. A high-volume move below those levels would setup RST to re-test some previous support at $10.50 to $10 a share or possibly trend lower.

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