Stock Quotes in this Article: EQIX, ESL, RT, SHLD, SHOS

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, it's 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 five stocks whose insiders have been doing some big buying per SEC filings.

Ruby Tuesday

One stock that insiders are jumping into here is Ruby Tuesday (RT), which owns and operates Ruby Tuesday, Lime Fresh Mexican, GrillMarlin & Ray's and Wok Hay casual dining restaurants. Insiders are buying this stock into notable strength, since shares are higher by 34% over the last three months.

Ruby Tuesday has a market cap of $456 million and an enterprise value of $658 million. This stock trades at a cheap valuation, with a price-to-sales of 0.39 and a price-to-book of 1.00. Its estimated growth rate for this year is -439.1%, and for next year it's pegged at 84.6%. This is not a cash-rich company, since the total cash position on its balance sheet is $44.47 million and its total debt is $266.87 million.

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A director just bought 50,000 shares, or about $342,000 worth of stock, at $6.85 per share.

From a technical perspective, RT is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last few weeks, with shares moving higher from its low of $5.17 to its recent high of $7.76 a share. During that uptrend, shares of RT have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of RT within range of triggering a major breakout trade.

If you're bullish on RT, then I would look for long-biased trades as long as this stock is trending above its 200-day at $6.71 and then once breaks out above some near-term overhead resistance levels at $7.76 to $7.96 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 volume of 706,783 shares. If that breakout triggers soon, then RT will set up to re-fill some of its previous gap-down-day zone from July of 2013 that started near $9.50. If that gap gets filled with strong upside volume flows, then RT could easily trend well north of $10 a share.

Equinix

Another stock that insiders are active in here is Equinix (EQIX), which provides data center services to protect and connect the information assets for the enterprises, financial services companies, and content and network providers. Insiders are buying this stock into modest strength, since shares are up by 7.2% over the last six months.

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Equinix has a market cap of $8.9 billion and an enterprise value of $12.3 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 95 and a forward price-to-earnings of 31. Its estimated growth rate for this year is 89.4%, and for next year it's pegged at 62%. This is not a cash-rich company, since the total cash position on its balance sheet is $631.70 million and its total debt is $4.16 billion.

A beneficial owner just bought 71,900 shares, or about $12.34 million worth of stock, at $171.70 per share.

From a technical perspective, EQIX is currently trending its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock recently started to spike back above its 200-day moving average with solid upside volume flows. That spike is now starting to push shares of EQIX within range of triggering a near-term breakout trade above some key overhead resistance levels.

If you're in the bull camp on EQIX, then I would look for long-biased trades as long as this stock is trending above its 200-day at $177.06 or above more key near-term support at $169.95 and then once it breaks out above some near-term overhead resistance levels at $183.73 to $186.42 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 955,098 shares. If that breakout gets underway soon, then EQIX will set up to re-test or possibly take out its next major overhead resistance levels at $194.99 to $196.20 a share. Any high-volume move above those levels will then give EQIX a chance to tag its next major overhead resistance level at $205.50 a share.

Sears Holdings

One retail department store player that insiders are loading up on here is Sears Holdings (SHLD), which operates as a retailer in the U.S. and Canada. Insiders are buying this stock into weakness, since shares are off by 25% over the last six months.

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Sears Holdings has a market cap of $4.4 billion and an enterprise value of $7.3 million. This stock trades at a reasonable valuation, with a price-to-sales of 0.12 and a price-to-book of 2.48. Its estimated growth rate for this year is 0.70%, and for next year it's pegged at 0.70%. This is not a cash-rich company, since the total cash position on its balance sheet is $1.03 billion and its total debt is $4.25 billion.

A director just bought 475,000 shares, or about $15.94 million worth of stock, at $33.56 per share.

From a technical perspective, SHLD is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock recently formed a double bottom chart pattern at $30.50 to $31.26 a share. Following that bottom, shares of SHLD have started to uptrend and move back above both its 50-day and 200-day moving averages. That move has now pushed shares of SHLD within range of triggering a near-term breakout trade.

If you're bullish on SHLD, then I would look for long-biased trades as long as this stock is trending above its 50-day at $36.43 and then once it breaks out above some near-term overhead resistance at $42.47 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average action of 1.57 million shares. If that breakout hits soon, then SHLD will set up to re-test or possibly take out its next major overhead resistance levels at $52.50 to $54.50 a share.

Sears Hometown and Outlet Stores

Another stock that insiders are active in love with here is Sears Hometown and Outlet Stores (SHOS), which is engaged in the retail sale of home appliances, hardware, tools and lawn and garden equipment in the U.S. Insiders are buying this stock into notable weakness, since shares are down by 18.9% over the last six months.

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Sears Hometown and Outlet Stores has a market cap of $528 million and an enterprise value of $584 million. This stock trades at reasonable valuation, with a trailing price-to-earnings 15. This is not a cash-rich company, since the total cash position on its balance sheet is $23.48 million and its total debt is $99.86 million.

A beneficial owner just bought 173,574 shares, or about $3.57 million worth of stock, at $20.62 per share.

From a technical perspective, SHOS is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been uptrending a bit over the last few weeks, with shares moving higher from its low of $19.75 to its recent high of $24.63 a share. During that move, shares of SHOS have been making mostly higher lows and higher highs. That move has now pushed shares of SHOS within range of triggering a near-term breakout trade.

If you're bullish on SHOS, then I would look for long-biased trades as long as this stock is trending above some near-term support at $21 and then once it breaks out above its 50-day at $23.29 a share and once it clears more near-term overhead resistance levels at $25 to $26.31 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 168,010 shares. If that breakout materializes soon, then SHOS will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $29.27 to $32.50 a share.

Esterline Technologies

One final stock with some decent insider buying is Esterline Technologies (ESL), which designs, manufactures and markets engineered products and systems primarily for aerospace and defense customers in the U.S. and internationally. Insiders are buying this stock into big strength, since shares are up sharply by 37% over the last six months.

Esterline Technologies has a market cap of $3.4 billion and an enterprise value of $3.9 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 20 and a forward price-to-earnings of 16. Its estimated growth rate for this year is 0.90%, and for next year it's pegged at 14.6%. This is not a cash-rich company, since the total cash position on its balance sheet is $208.44 million and its total debt is $706.29 million.

A director just bought 8,778 shares, or about $907,000 worth of stock, at $103.36 per share.
From a technical perspective, ESL is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock recently formed a double bottom chart pattern at $102.47 to $101.63 a share. Following that bottom, shares of ESL have started to spike higher back above its 50-day moving average. That move is starting to push shares of ESL within range of triggering a major breakout trade.

If you're bullish on ESL, then look for long-biased trades as long as this stock is trending above those double bottom support levels and then once it breaks out above some near-term overhead resistance levels at $111.45 to its 52-week high of $113.06 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 222,378 shares. If that breakout starts soon, then ESL will set up to enter new 52-week-high territory above $113.06, which is bullish technical price action. Some possible upside targets off that move are $120 to $125 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.