Insider Selling Highlights Growing Downside Risk

[TradingHelpDesk]

Early in March when equity markets were suffering multi-year lows, insiders and company executives offered clues as to the value of their firm’s stock - they bought their company’s stock by the bucket-load. The rest is history, US equity markets are now around 50% higher. So when insiders start off-loading equities, banking profits, it is time to at least sit up and take notice. Company insiders are now selling stock at the highest rate in two years. This action does not guarantee a market decline but it does imply the easy money in the current bullish run has been made and downside risks, whether temporary or cyclical, have increased. The energy and information technology sectors are amongst those which have seen the largest insider selling activity with the IT sector more vulnerable to a potential retreat following its out-performance in recent months. It’s not a ‘sell’ signal, but it is a ‘be more careful’ signal if you are long equities.

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