Stock Quotes in this Article: IMH, LMNX, PM, RSH, THRX

 DELAFIELD, Wis. (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.

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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 five stocks whose insiders have been doing some big buying per SEC filings.

Philip Morris International

One stock that insiders are buying up a large amount of here is Philip Morris International (PM), which manufactures and sells cigarettes and other tobacco products in markets outside the U.S. Insiders are buying this stock into modest strength, since shares are up 5.5% so far in 2013.

Philip Morris International has a market cap of $143 billion and an enterprise value of $168 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 17.25 and a forward price-to-earnings of 14.6. Its estimated growth rate for this year is 4.2%, and for next year it's pegged at 11.8%. This is not a cash-rich company, since the total cash position on its balance sheet is $3.59 billion and its total debt is $25.50 billion. This stock currently sports a dividend yield of 3.8%.

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A director just bought 123,500 shares, or about $11.01 million worth of stock, at $89.15 per share.

From a technical perspective, PM is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending over the last two months and change, with shares dropping from its high of $95.38 to its recent low of $85.21 a share. During that move, shares of PM have been mostly making lower highs and lower lows, which is bearish technical price action.

If you're bullish on PM, then I would look for long-biased trades as long as this stock is trending above some near-term support at $87.65 to $87 and then once it takes out its 200-day at $88.72 and its 50-day at $89.25 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 5.10 million shares. If we get that move soon, then PM will set up to re-test or possibly take out its next major overhead resistance levels at $91.40 to $92.26 a share. Any high-volume move above those levels will then put $94 to $95 into range for shares of PM.

 

RadioShack

Another stock that insiders are jumping into here is RadioShack (RSH), which is involved in the retail sale of consumer electronics goods and services through its RadioShack store chain. Insiders are buying this stock into decent strength, since shares are up 17.4% so far in 2013.

RadioShack has a market cap of $250 million and an enterprise value of $536 million. This stock trades at a cheap valuation, with a price-to-sales of 0.06 and a price-to-book of 0.48. Its estimated growth rate for this year is -101.7%, and for next year it's pegged at 44.4%. This is not a cash-rich company, since the total cash position on its balance sheet is $432 million and its total debt is $712.70 million.

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A director just bought 100,000 shares, or about $255,000 worth of stock, at $2.55 per share.

From a technical perspective, RSH is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly for the last three months, with shares dropping from its high of $4.28 to its recent low of $2.18 a share. During that move, shares of RSH have been consistently making lower highs and lower lows, which is bearish technical price action.

If you're in the bull camp on RSH, then look for long-biased trades as long as this stock is trending above some near-term support at $2.46 and then once it breaks out above its 200-day at $2.92 and its 50-day at $3.14 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 3.21 million shares. If that breakout triggers soon, then RSH will set up to re-test or possibly take out its next major overhead resistance levels at $3.30 to $3.60.

Impac Mortgage

Another stock that insiders are active in here is Impac Mortgage (IMH), which offers residential mortgage services in the U.S. Insiders are buying this stock into big time weakness, since shares are off by 27.4% so far in 2013.

Impac Mortgage has a market cap of $89 million and an enterprise value of $6.05 billion. This stock trades at a premium valuation, with a forward price-to-earnings of 124.10. This is not a cash-rich company, since the total cash position on its balance sheet is $14.15 million and its total debt is a whopping $5.98 billion.

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A beneficial owner just bought 77,863 shares, or about $782,000 worth of stock, at $10 to $10.05 per share.

From a technical perspective, IMH is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been trending sideways in a consolidation pattern for the last month, with shares moving between $9.80 on the downside and $10.90 on the upside. A high-volume move above the upper-end of its sideways trading chart pattern soon could trigger a big breakout trade for shares of IMH.

 

If you're bullish on IMH, then look for long-biased trades as long as this stock is trending above some key near-term support at $9.80 and then once it breaks out above some near-term overhead resistance levels at $10.50 to $10.90 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 29,759 shares. If that breakout triggers soon, then IMH will set up to re-test or possibly take out its next major overhead resistance levels at $11.88 to $11.95. Any high-volume move above those levels will then give IMH a chance to tag $14.

Luminex

A health care stock that insiders are jumping into here is Luminex (LMNX), which develops, manufactures and sells proprietary biological testing technologies and products with applications throughout the life sciences and diagnostics industries. Insiders are buying this stock into notable strength, since shares are up 23.2% so far in 2013.

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Luminex has a market cap of $859 million and an enterprise value of $784 million. This stock trades at a premium valuation, with a price-to-sales of 119.83 and a price-to-book of 33.63. Its estimated growth rate for this year is 36.7%, and for next year it's pegged at 51.2%. This is a cash-rich company, since the total cash position on its balance sheet is $42.97 million and its total debt is just $1.67 million.

A director just bought 27,000 shares, or about $540,000 worth of stock, at $20.01 per share.

From a technical perspective, LMNX is currently trending above its 200-day and just below is 50-day moving average, which is neutral trendwise. This stock recently gapped down sharply from $23.50 to $19.75 a share with heavy downside volume flows. Following that move, shares of LMNX have started to rebound off $19.75 and the stock is starting to push within range of triggering a near-term breakout trade.

If you're bullish on LMNX, then look for long-biased trades as long as this stock is trending some key near-term support at $19.75, and then once it breaks out above its 50-day at $21.14 a share and above its gap down day high of $21.83 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 206,755 shares. If that breakout hits soon, then LMNX will set up to re-test or possibly take out its 52-week high at $24.10. Any high-volume move above that level will then give LMNX a chance to tag $25 to $26.

Theravance

 

One final name with some monster insider buying is Theravance (THRX), which is a biopharmaceutical company with a pipeline of internally discovered product candidates and strategic collaborations with pharmaceutical. Insiders are buying this stock into big time strength, since shares are up 64% so far in 2013.

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Theravance has a market cap of $3.56 billion and an enterprise value of $3.71 billion. This stock trades at a premium valuation, with a price-to-sales of 371.87 and a price-to-book of 42.96. Its estimated growth rate for this year is -840%, and for next year it's pegged at 43.6%. This is a cash-rich company, since the total cash position on its balance sheet is $533.33 million and its total debt is $459.96 million.

A beneficial owner just bought 3,064,407 shares, or about $111.85 million worth of stock, at $36.51 per share.

From a technical perspective, THRX is currently trending above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock recently ran into stiff overhead resistance at $39.60 to $39.73 a share. The stock has subsequently sold off from those resistance levels and it's now moving back below its 50-day moving average of $37.59 a share and back below some key near-term support at $37.20 a share.

If you're bullish on THRX, then look for long-biased trades as long as this stock is trending above its next major support levels at $34 to $33, and then once it breaks out back above its 50-day at $37.59 a share with high volume. Look for a sustained move or close above its 50-day at $37.59 a share with volume that hits near or above its three-month average action of 1.47 million shares. If that breakout triggers soon, then THRX will set up to re-test or possibly take out its next major overhead resistance level at $39.73 a share.

To see more stocks with notable insider buying, check out the Stocks With Big Insider Buying portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

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

Roberto Pedone, based out of Delafield, Wis., 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.