Stock Quotes in this Article: CYTR, HNR, KTOS, TROX, MACK

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

>>3 Stocks Under $10 in Breakout Territory

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.

>>5 Stocks Set to Soar on Bullish Earnings

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.

>>5 Breakout Stock Trades for a Santa Claus Rally

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.

CytRx

One biopharmaceutical player that insiders are in love with here is CytRx (CYTR), whose oncology pipeline includes two programs in clinical development for cancer indications: aldoxorubicin and tamibarotene. Insiders are buying this stock into strength, since shares are up sharply by 40% so far in 2013.

>>5 Health Care Stocks Ready to Cut You a Dividend Check

CytRx has a market cap of $110 million and an enterprise value of $74 million. This stock trades at a premium valuation, with a price-to-sales of 330.20 and a price-to-book of 6.45. Its estimated growth rate for this year is 7.7%, and for next year it's pegged at 16.7%. This is a cash-rich company, since the total cash position on its balance sheet is $23.04 million and its total debt is zero.

A beneficial owner just bought 284,979 shares, or about $694,000 worth of stock, at $2.35 per share.

From a technical perspective, CYTR 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 month, with shares moving higher from its low of $2 to its intraday high of $2.69 a share. During that move, shares of CYTR have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of CYTR within range of triggering a big breakout trade.

If you're bullish on CYTR, then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $2.32 or at $2.12, and then once breaks out above some near-term overhead resistance at $2.70 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 535,162 shares. If that breakout hits soon, then CYTR will set up to re-test or possibly take out its next major overhead resistance levels at $3.20 to $3.40 a share. Any high-volume move above those levels will then give CYTR a chance to re-test or possibly take out its 52-week high at $3.65 a share.

Kratos Defense & Security Solutions

Another stock that insiders are active in here is Kratos Defense & Security Solutions (KTOS), a specialized national security technology business providing mission-critical products, services and solutions for U.S. national security priorities. Insiders are buying this stock into decent strength, since shares are up 35% so far in 2013.

>>5 Rocket Stocks to Buy in December

Kratos Defense & Security Solutions has a market cap of $390 million and an enterprise value of $977 million. This stock trades at a cheap valuation, with a trailing price-to-earnings of 12.94. Its estimated growth rate for this year is 106.1%, and for next year it's pegged at 280%. This is not a cash-rich company, since the total cash position on its balance sheet is $49.80 million and its total debt is $644.60 million.

The CEO just bought 31,273 shares, or about $199,000 worth of stock, at $6.40 per share.

From a technical perspective, KTOS is currently trending above its 200-day moving average and well below its 50-day moving average, which is neutral trendwise. This stock has recently found some buying interest right around its 200-day moving average, after shares fell sharply from $8.85 to $6.32 a share. This move is starting to push shares of KTOS within range of triggering a near-term breakout trade.

If you're in the bull camp on KTOS, then I would look for long-biased trades as long as this stock is trending above its 50-day at $6.60 or above its recent low of $6.32, and then once it breaks out above some near-term overhead resistance levels at $7 to $7.14 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 562,647 shares. If that breakout triggers soon, then KTOS will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day moving average of $7.84 to $8.50 a share.

Merrimack Pharmaceuticals

One biopharmaceuticals player that insiders are jumping into here is Merrimack Pharmaceuticals (MACK), which is discovering, developing and preparing to commercialize medicines paired with companion diagnostics for the treatment of serious diseases, with an initial focus on cancer. Insiders are buying this stock into notable weakness, since shares are down by 24% so far in 2013.

>>Timing the Fed's Taper

Merrimack Pharmaceuticals has a market cap of $472 million and an enterprise value of $245 million. Its estimated growth rate for this year is 0.8%, and for next year it's pegged at 3.9%. This is a cash-rich company, since the total cash position on its balance sheet is $182.49 million and its total debt is $111.33 million.

A director just bought 207,000 shares, or about $769,000 worth of stock, at $3.71 to $3.74 per share. Another director also just bought 75,000 shares, or about $270,000 worth of stock, at $3.51 to $3.79 per share.

From a technical perspective, MACK 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 soaring higher from its low of $2.05 to its intraday high of $4.65 a share. During that uptrend, shares of MACK have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of MACK within range of triggering a near-term breakout trade.

If you're bullish on MACK, then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $4 or its 50-day at $3.29 and then once it breaks out above its 200-day moving average of $4.76 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 volume of 1.79 million shares. If that breakout hits soon, then MACK will set up to re-test or possibly take out its next major overhead resistance levels at $6.50 to $7 a share.

Tronox

One basic materials player that insiders are loading up on here is Tronox (TROX), which produces and markets titanium ore and titanium dioxide in the Americas, Europe and the Asia-Pacific. Insiders are buying this stock into modest strength, since shares are up huge 16% so far in 2013.

>>5 Breakout Trades for the Final Stretch of 2013

Tronox has a market cap of $2.4 billion and an enterprise value of $3.3 billion. This stock trades at a premium valuation, with a forward price-to-earnings of 118.39. Its estimated growth rate for this year is -149.5%, and for next year it's pegged at 117%. This is not a cash-rich company, since the total cash position on its balance sheet is $1.46 billion and its total debt is $2.40 billion. This stock currently sports a dividend yield of 4.8%.

The CEO just bought 20,000 shares, or about $426,000 worth of stock, at $21.32 per share.

From a technical perspective, TROX 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 sharply from its high of $26.69 to its recent low of $20.81 a share. During that move, shares of TROX have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of TROX have started to find some buying interest right around its 200-day moving average of $21.29 a share.

If you're bullish on TROX, then I would look for long-biased trades as long as this stock is trending above some key near-term support at $20.81 and then once it breaks out above some near-term overhead resistance levels at $22.20 to its 50-day moving average at $22.88 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 641,766 shares. If that breakout hits soon, then TROX will set up to re-test or possibly take out its next major overhead resistance levels at $24.35 to $25.12 a share.

Harvest Natural Resources

One final name with some decent insider buying is Harvest Natural Resources (HNR), an independent energy company engaged in the acquisition, exploration, development, production and disposition of oil and natural gas properties. Insiders are buying this stock into big time weakness, since shares are off by 56% so far in 2013.

Harvest Natural Resources has a market cap of $158 million and an enterprise value of $204 million. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 14.72. Its estimated growth rate for this year is 95.4, and for next year it's pegged at -118.1%. This is not a cash-rich company, since the total cash position on its balance sheet is $3.93 million and its total debt is $76.79 million.

A director just bought 100,000 shares, or $315,000 worth of stock, at $3.15 per share.

From a technical perspective, HNR is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been uptrending strong for the last few weeks, with shares moving higher from its low of $2.76 to its recent high of $3.97 a share. During that uptrend, shares of HNR have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of HNR within range of triggering a near-term breakout trade.

If you're bullish on HNR, then look for long-biased trades as long as this stock is trending above some near-term support levels at $3.50 or at $3.25 and then once it breaks out above its 200-day moving average of $4.17 and its 50-day moving average of $4.63 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 754,186 shares. If that breakout triggers soon, then HNR will set up to re-test or possibly take out its next major overhead resistance levels at $5.50 to $6.08 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.


RELATED LINKS:







Follow Stockpickr on Twitter and become a fan on Facebook.

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.