Stock Quotes in this Article: AKRX, AVEO, CMLS, CPRX, MACK

WINDERMERE, Fla. (Stockpickr) -- Corporate insiders sell their own companies' stock for a number of reasons.

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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, its large 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 it's twice as important to make sure the trend of the stock coincides with the insider buying.

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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. Here's a look at some stocks where insiders have been doing some big buying in per SEC filings.

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.

AVEO Pharmaceuticals has a market cap of $296 million and an enterprise value of $144 million. This stock trades at a premium valuation, with a price-to-sales of 63.55 and a price-to-book of 2.23. Its estimated growth rate for this year is -493.2%, and for next year it's pegged at 29.2%. This is a cash-rich company, since the total cash position on its balance sheet is $189.69 million and its total debt is $25.96 million.

The CEO just bought 75,000 shares, or about $498,000 worth of stock, at $6.61 to $6.85 per share. A director also just bought 15,000 shares, or about $101,000 worth of stock, at $6.65 per share.

From a technical perspective, AVEO 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 at $5.80 to $5.95 a share. Following that bottom, shares of AVEO have started to rebound back towards its 50-day moving average of $7.20 a share.

If you're in the bull camp on AVEO, then I would look for long-biased if this stock manages to break out above some near-term overhead resistance levels at $7.20 to $7.32 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 322,719 shares. If that breakout triggers soon, then AVEO will set up to re-test or possibly take out its next major overhead resistance levels at $7.82 to $8.25 a share. Any high-volume move above $8.25 to $8.50 will then put $10 a share into focus for shares of AVEO.

Akorn

One name in the healthcare complex that insiders are jumping into here is Akorn (AKRX). This company manufactures and markets a full line of diagnostic and therapeutic ophthalmic pharmaceuticals as well as niche hospital drugs and injectable pharmaceuticals. Insiders are buying this stock into some notable strength, since shares are up 20% so far in 2012.

Akorn has a market cap of $1.28 billion and an enterprise value of $1.33 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 46.06 and a forward price-to-earnings of 20.38. Its estimated growth rate for this year is 45.7%, and for next year it's pegged at 29.4%. This is not a cash-rich company, since the total cash position on its balance sheet is $38.4 million and its total debt is $103.65 million.

A director just bought 30,500 shares, or about $416,000 worth of stock, at $13.59 to $13.71 per share.

From a technical perspective, AKRX is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been trending sideways for the last month, with shares moving between $12.66 on the downside and $13.77 on the upside. A high-volume move outside of that range soon will likely set up the next major trend for shares of AKRX.

If you‘re bullish on AKRX, then I would look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $13.75 to $13.77 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 868,276 shares. If that breakout triggers soon, then AKRX will set up to re-test or possibly take out its next major overhead resistance levels at $14.50 to $14.95 a share. Any high-volume move above $14.95 will then put $16 to $16.87 into focus for shares of AKRX.

Cumulus Media

Another name in the radio broadcasting sector that insiders are snapping up a large amount of stock in is Cumulus Media (CMLS). This company owns and operates commercial radio station clusters throughout the United States. Insiders are buying this stock into some notable weakness, since shares are down by 18% so far in 2012.

Cumulus Media has a market cap of $472 million and an enterprise value $3.12 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 45.93 and a forward price-to-earnings of 12.32. Its estimated growth rate for this year is 146.4%, and for next year it's pegged at 69.2%. This is not a cash-rich company, since the total cash position on its balance sheet is $46.98 million and its total debt is a whopping $2.69 billion.

A director and beneficial owner just bought 1,478,228 shares, or around $3.56 million worth of stock, at $2.40 to $2.47 per share.

From a technical perspective, CMLS 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 strong for the last month, with shares moving from a low of $2.09 to its recent high of $2.73 a share. During that uptrend, shares of CMLS have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed CMLS within range of triggering a major breakout trade.

If you're in the bull camp on CMLS, then I would look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $2.73 to $2.90 a share and then once it clears more overhead resistance at $3.12 to $3.13 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 222,979 shares. If that breakout triggers soon, then CMLS will set up to re-test or possibly take out its next major overhead resistance levels at $3.65 to $3.74 a share. Keep in mind that any move above $2.86 will then push CMLS back above its 200-day moving average, which s bullish technical price action.

Catalyst Pharmaceuticals

The last name to consider with some huge insider buying is biotechnology and drugs player Catalyst Pharmaceuticals (CPRX). This company is focused on the development and commercialization of prescription drugs targeting diseases of the central nervous system with a focus on the treatment of drug addiction and epilepsy. Insiders are buying this stock into some big time weakness, since shares are off by 65% so far in 2012.

Catalyst Pharmaceuticals has a market cap of $15.06 million and an enterprise value of $3.67 million. This stock trades at a cheap valuation, with a price-to-book of 1.65. Its estimated growth rate for next quarter is 50%, and for this year it's pegged at 31%. This is a cash-rich company, since the total cash position on its balance sheet is $11.97 million and its total debt is zero.

A beneficial owner just bought 5,000,000 shares, or about $3.75 million worth of stock, at 75 cents per share.

From a technical perspective, CPRX is currently trending well below both its 50-day and 200-day moving averages, which is bearish. This stock recently gapped down big from over $1.40 to close to 40 cents per share with heavy downside volume. Following that move, shares of CPRX have been trending sideways between 37 cents on the downside and 54 cents on the upside. A high-volume move outside of that range soon will likely lead to the next major trend for shares of CPRX.

If you're bullish on CPRX, then I would look for long-biased if this stock manages to break out above some near-term overhead resistance levels 49 cents to 54 cents per share and then once it takes out its gap down day high of 69 cents per 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 1,289,870 shares. If that breakout triggers soon, then CPRX will set up to re-fill some of that previous gap down zone that started around $1.40 a share. Some possible upside targets are its 50-day at 93 cents or its 200-day at $1.05 a share.

To see more stocks with notable insider buying like TripAdvisor (TRIP), Zaza Energy (ZAZA) and Active Network (ACTV), 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 technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.