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.

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.

At the end of the day, it's institutional money managers running big mutual funds and hedge funds who 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 monitor 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.

Edge Therapeutics

One clinical-stage biotechnology stock that insiders are loading up on here is Edge Therapeutics  (EDGE) , which discovers, develops and commercializes hospital-based therapies for acute life-threatening neurological conditions. Insiders are buying this stock into large weakness, since shares have fallen by 42% over the last six months.

Edge Therapeutics has a market cap of $218 million and an enterprise value of $166 million. Its estimated growth rate for this year is 62.8%. This is a cash-rich company, since the total cash position on its balance sheet is $52.88 million and its total debt is $5.90 million.

A director just bought 541,343 shares, or about $3.95 million worth of stock, at $7.30 per share.

From a technical perspective, Edge Therapeutics is currently trending below both its 50-day and 20-day moving averages, which is bearish. This stock recently formed a triple bottom chart pattern, after shares found some buying interest at $6.45, $6.25 and $6.23 a share. Shares of Edge Therapeutics have now started to spike a bit higher off some near-term support at $6.83 a share. That spike is quickly pushing this stock within range of triggering a near-term breakout trade.

If you're bullish on Edge Therapeutics, then I would look for long-biased trades as long as this stock is trending above some near-term support at $6.83 a share or above those triple bottom support levels and then once it breaks out above Wednesday's intraday high of $8.03 a share to more near-term resistance at $8.42 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 113,623 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 its 50-day moving average of $9.07 to $10.79, or even $12 a share.

OvaScience

Another stock that insiders are in love with here is OvaScience  (OVAS) , which engages in the discovery, development and commercialization of new treatments for infertility. Insiders are buying this stock into massive weakness, since shares have plunged by 52.2% over the last six months.

OvaScience has a market cap of $220 million and an enterprise value of $93 million. This stock trades at a reasonable valuation, with a price-to-book of 1.74. Its estimated growth rate for this year is -3.3%, and for next year it's pegged at 2.2%. This is a cash-rich company, since the total cash position on its balance sheet is $126.66 million and its total debt is zero.

The CEO just bought 162,732 shares, or about $1.23 million worth of stock, at $7.50 to $8.05 per share. A director also just bought 162,732 shares, or about $1.23 million worth of stock, at $7.50 to $8.05 per share.

From a technical perspective, OvaScience is currently trending above its 50-day moving average and well below its 200-day moving average, which is neural trendwise. This stock has been uptrending strong over the last two months and change, with shares moving higher off its new 52-week low of $4.53 a share to its recent high of $8.88 a share. During that uptrend, shares of OvaScience have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed this stock within range off triggering a big breakout trade above some key near-term overhead resistance levels.

If you're in the bull camp on OvaScience, then I would look for long-biased trades as long as this stock is trending above its 50-day moving average of $6.77 a share and then once it breaks out above some near-term overhead resistance levels at $8.88 to $9.06 a share with volume that hits near or above its three-month average action of 565,566 shares. If that breakout materializes soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $10 to $10.50, or even $11.20 to $11.34 a share.

Performance Sports Group

One consumer goods player that insiders are active in here is Performance Sports Group  (PSG) , which designs, manufactures and distributes performance sports equipment, related apparel and accessories for ice hockey, roller hockey, lacrosse, baseball, and softball primarily in the U.S., Canada and Europe. Insiders are buying this stock into massive weakness, since shares have collapsed by 71.8% over the last six months.

Performance Sports Group has a market cap of $169 million and an enterprise value of $651 million. This stock trades at a cheap valuation, with a forward price-to-earnings of 8.8. Its estimated growth rate for this year is -82.4%, and for next year it's pegged at 122.2%. This is not a cash-rich company, since the total cash position on its balance sheet is $6.59 million and its total debt is $477.88 million.

A beneficial owner just bought 651,400 shares, or about $2.58 million worth of stock, at $3.93 to $3.97 per share.

From a technical perspective, Performance Sports Group is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently gapped-down sharply lower from around $9 a share to its new 52-week low of $2.80 a share with monster downside volume flows. Following that move, shares of Performance Sports Group have now started to rebound off that $2.80 low, and it's beginning to trend within range of triggering a big breakout trade.

If you're bullish on Performance Sports Group, then I would look for long-biased trades as long as this stock is trending above some key near-term support at $3.48 a share and then once it breaks out above some near-term overhead resistance levels at $4 to $4.50 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 1.06 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 level at its gap-down-day high of $5.21 a share. Any high-volume move above $5.21 will then give this stock a chance to re-fill some of its previous gap-down-day zone that started near $9 a share.

Ecolab

One cleaning products player that insiders are snapping up a huge amount of stock in here is Ecolab  (ECL) , which provides water, hygiene and energy technologies and services for customers worldwide. Insiders are buying this stock into modest weakness, since shares have fallen by 7.8% over the last six months.

Ecolab has a market cap of $30.9 billion and an enterprise value of $36.8 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 31.5 and a forward price-to-earnings of 20.4. Its estimated growth rate for this year is 2.3%, and for next year it's pegged at 14.1%. This is not a cash-rich company, since the total cash position on its balance sheet is $92.80 million and its total debt is $6.47 billion. This stock currently sports a dividend yield of 1.3%.

A beneficial owner just bought 499,999 shares, or about $52.67 million worth of stock, at $104.59 per share.

From a technical perspective, Ecolab is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently formed a double bottom chart pattern, after shares found some buying interest around $102 a share. Following that potential bottom, shares of Ecolab have now started to trend higher and it's beginning to move within range of triggering a near-term breakout trade.

If you're bullish on Ecolab, then I would look for long-biased trades as long as this stock is trending above some near-term support at $102 a share and then once it breaks out above both its 20-day moving average of $104.68 a share and its 50-day moving average of $104.98 a share and above more resistance at $106.82 a share with volume that hits near or above its three-month average action of 1.53 million shares. If that breakout takes hold soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $110 to its 200-day moving average of $111.70 a share.

Loral Space & Communications

One final stock with some large insider buying is technology player Loral Space & Communications  (LORL) , which offers satellite-based communications services to broadcast, telecom, corporate and government customers worldwide. Insiders are buying this stock into large weakness, since shares have traded off by 34% over the last six months.

Loral Space & Communications has a market cap of $1 billion and an enterprise value of $589 million. This stock trades at a premium valuation, with a price-to-book of 10.2. This is a cash-rich company, since the total cash position on its balance sheet is $58.85 million and its total debt is zero.

A beneficial owner just bought 190,000 shares, or about $6.78 million worth of stock at $35.70 per share. From a technical perspective, Loral Space & Communications is currently trending above its 50-day moving average and well below its 200-day moving average, which is neutral trendwise. This stock has been uptrending over the last month and change, with shares moving higher off its new 52-week low of $29.55 to its intraday high on Wednesday of $37.30 a share. During that uptrend, shares of Loral Space & Communications 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 above some key overhead resistance levels.

If you're bullish on Loral Space & Communications, then I would look for long-biased trades as long as this stock is trending above its 20-day moving average of $33.49 a share and then once it breaks out above some near-term overhead resistance levels at $37.30 to $38 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 82,515 shares. If that breakout kicks off soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $40 to $41.20, or even $43 to $45 a share.

 

Disclosure: This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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