Stock Quotes in this Article: CYCC, MO, SWI, SREV, EOX

MADISON, Wis. (Stockpickr) -- 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.

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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.

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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.

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.

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SolarWinds

One technology player that insiders are active in here is SolarWinds (SWI), which designs, develops, markets, sells and supports enterprise-class IT infrastructure management software to IT professionals. Insiders are buying this stock into weakness, since shares are off by 26% over the last three months.

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SolarWinds has a market cap of $3.1 billion and an enterprise value of $2.8 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 36.69 and a forward price-to-earnings of 22.49. Its estimated growth rate for this year is 15.4%, and for next year it's pegged at 18.5%. This is a cash-rich company, since the total cash position on its balance sheet is $265.76 million and its total debt is zero.

A director just bought 5,000 shares, or about $ 202,000 worth of stock, at $40.59 per share.

From a technical perspective, SWI 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 falling from its high of $61.52 to its recent low of $39.95 a share. During that downtrend, shares of SWI have been mostly making lower highs and lower lows, which is bearish technical price action. That said, SWI has started to bounce off that $39.95 low and off oversold levels, since its current relative strength index reading is 34.41.

If you're bullish on SWI, then I would look for long-biased trades as long as this stock is trending above its recent low of $39.95, and then once it breaks out above some near-term overhead resistance at $42.39 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 922,790 shares. If we get that move soon, then SWI could bounce back towards its next significant overhead resistance levels at $46 to $48.62 a share.

 

Servicesource International

Another service revenue management player that insiders are jumping into here is Servicesource International (SREV), which helps hardware, software, health care and life sciences companies derive from their customers more revenue from maintenance, support and subscription agreements. Insiders are buying this stock into strength, since shares are up by 37% so far in 2013.

Servicesource has a market cap of $614 million and an enterprise value of $477 million. This stock trades at a fair valuation, with a forward price-to-earnings of 57.36. Its estimated growth rate for this year is -10%, and for next year it's pegged at 55.6%. This is a cash-rich company, since the total cash position on its balance sheet is $117.70 million and its total debt is just $868,000.

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A director just bought 202,741 shares, or $1.41 million worth of stock, at $6.96 per share. The same director also just bought 115,000 shares, or about $783,000 worth of stock, at $6.81 per share.

From a technical perspective, SREV is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strongly for the last month, with shares moving higher from its low of $5.36 to its recent high of $8.32 a share. During that uptrend, shares of SREV have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of SREV within range of triggering a near-term breakout trade.

If you're in the bull camp on SREV, then look for long-biased as long as this stock is trending above its 200-day moving average at $7.09, and then once it breaks out above some near-term overhead resistance at $8.32 a share with high volume. Look for a sustained move or close above that level with volume that registers near or above its three-month average action of 562,584 shares. If that breakout triggers soon, then SREV will set up to re-test or possibly take out its next major overhead resistance levels $9.15 to $10.77 a share, or even $12 a share.

Altria Group

One consumer goods player that insiders are loading up on here is Altria Group (MO), which manufactures and sells cigarettes, other tobacco products, machine-made large cigars and pipe tobacco. Insiders are buying this stock into decent strength, since shares are up by 16% so far in 2013.

Altria Group has a market cap of $73 billion and an enterprise value of $84 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 16.90 and a forward price-to-earnings of 14.21. Its estimated growth rate for this year is 8.6%, and for next year it's pegged at 7.1%. This is not a cash-rich company, since the total cash position on its balance sheet is $3.78 billion and its total debt is $13.88 billion. This stock sports a dividend yield of 4.7%.

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A director just bought 26,700 shares, or about $988,000 worth of stock, at $37.04 per share.

From a technical perspective, MO 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 six months, with shares soaring higher from its low of $30.54 to its recent high of $37.61 a share. During that uptrend, shares of MO have been consistently making higher lows and higher highs, which is bullish technical price action. That said, shares of MO recently ran into stiff resistance at $37.53 to $37.61 a share.

If you're bullish on MO, then look for long-biased trades as long as this stock is trending above its 50-day at $35.75 and then once it breaks out above some near-term overhead resistance levels at $37.53 to $37.61 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 10.09 million shares. If that breakout triggers soon, then AIG will set up to enter new 52-week-high territory above $37.61, which is bullish technical price action. Some possible upside targets off that breakout are $40 to $43 a share.

Cyclacel Pharmaceuticals

A biotechnology stock that insiders are snapping up shares in here is Cyclacel Pharmaceuticals (CYCC), which is engaged in the development and commercialization of novel, mechanism-targeted drugs to treat human cancers and other serious diseases. Insiders are buying this stock into extreme weakness, since shares are down by 44% so far in 2013.

Cyclacel Pharmaceuticals has a market cap of $36 million and an enterprise value $21 million. This stock trades at a premium valuation, with a price-to-sales of 125.85 and a price-to-book of 3.46. This is a cash-rich company, since the total cash position on its balance sheet is $14.14 million and its total debt is zero.

The president just bought 100,000 shares, or $300,000 worth of stock, at $3.00 per share. The president also just bought another 100,000 shares, or $300,000 worth of stock, at $3.00 per share.

From a technical perspective, CYCC 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 $6.05 to its recent low of $2.91 a share. During that downtrend, shares of CYCC have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of CYCC have started to bounce off that $2.91 low and off of oversold levels, since its relative strength index recently dipped well under 30.

If you're bullish on CYCC, then look for long-biased trades as long as this stock is trending above $3.20 or above $3 and then once it breaks out above some near-term overhead resistance at $3.64 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 219,831 shares. If that breakout triggers soon, then CYCC will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day of $4.58 a share or its 200-day at $5.10 a share.

Emerald Oil

One more stock with some big insider buying is independent exploration and production player Emerald Oil (EOX), which mainly develops operated wells in the Williston Basin in North Dakota and Montana. Insiders are buying this stock into strength, since shares are up by 22% so far in 2013.

Emerald Oil has a market cap of $167 million and an enterprise value of $140 million. This stock trades at a cheap valuation, with a forward price-to-earnings of 15.30. Its estimated growth rate for this year is 68.4%, and for next year it's pegged at 800%. This is a cash-rich company, since the total cash position on its balance sheet is $35.79 million and its total debt is $15.18 million. After you back out the debt, Emerald has $20.61 million of total cash on its balance sheet.

A beneficial owner just bought 2,785,600 shares, or about $16.35 million worth of stock, at $5.87 per share.

From a technical perspective, EOX 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 two months and change, with shares moving between $7.18 on the upside and $5.81 on the downside. A high-volume move above the upper-end of its recent range could trigger a major breakout trade for shares of EOX.

If you're bullish on EOX, then look for long-biased trades as long as this stock is trending above its 200-day at $6.27 or above more support at $5.89, and then once it breaks out above some near-term overhead resistance levels at $7.18 to $7.49 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 324,632 shares. If that breakout triggers soon, then EOX will set up to re-test or possibly take out its next major overhead resistance levels at $9.66 to $11 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 Madison, Wis.

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

Roberto Pedone, based out of Madison, 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.