Insider Selling and Charts
CANSLIM Investing makes a great case for charts as an indicator of insider selling. It always struck me as strange whenever I saw a stock gap up 8, 10 points on no news. Obviously, someone knows something.
High volume gap ups in a chart with no news can often indicate some positive announcements in the near future. That's what was seen in the chart of DHB. Later, the big Army contract was announced sending the stock to the moon.. at least for one day. Almost immediately the stock reversed on heavy volume and currently sits below support of its 50 day moving average. It's the kind of chart action that defies logic and something I don't think I have ever seen. Much of the damage done in this stock has to be tied to the large insider selling of the CEO, CFO and other insiders. Imagine you're the CEO of a company who has just received yet another large $100 million order from the Army bringing your order backlog to over $500 million. The 4 million shares sold by the CEO on November 29th is one thing. It's highly possible that David Brooks was in fact unaware of the contract announcement. Not to mention that insiders sell for many reasons. The red flag was the big sale of 5.31 million shares on December 29th after the announcement was made... and he's not done yet. Many smaller sales continue to be made by the CEO Brooks as well as other company insiders. This kind of selling raises eyebrows and should be a signal to you to stay away! Just as the charts can forecast the future, so can insider transactions. I would not be surprised to see some negative news announced soon.
Summation: Insiders will always have an edge over us. The good news is that charts and technical analysis bring us one step closer to their netherworld.
Analyst's expectations, institutional buying & selling, whispers, and stock option grants--
that is what controls the stock market.
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