Insiders Selling in US stocks

Entering 3rd week of September, I am getting very cautious on the stock market and also waiting eagerly of the market correction. I plan to off load my penny stocks this coming week as things do not really look good and I just don’t feel comfortable holding the stocks now.

I read two consecutive reports regarding the insiders selling these few days. The reports mentioned that there are many Corporate officers and directors in US have been selling the shares at great pace since August. They are the one who know the company inside out and they know what is the fair value of their company. In the principle of “Buy Low Sell High”, this selling of stocks by insiders is a very clear signal that the stock price is over value and the future earnings do not justify the current stock price. This is the leading indicator that stock market is going for a correction very soon. I will believe this indicator more than other analyst reports and preserve my cash first!

XLI – Industrial ETF for long term investment during economy recovery

XLI is another ETF that I am watching closely. When the economy comes out from recession and starts the recovery, the companies from this sector will start to manufacture capital equipment, machinery, engines for transportation, etc. Every company needs to have those infrastructures & equipment in place to expand their manufacturing capacity to produce the goods during the economy expansion. The top 20 companies for the XLI ETF as of Sept 9, 2009 is listed below:

As of Sept 9, 2009, XLI ETF is traded at $25.96. It is trying to break the strong resistance of $25.445 (61.8% Finonacci Retracement Level). XLI is currently above 20D, 50D and 200D MA line. 200D MA, a long term trend has reversed and currently on the up trend. I will wait for see whether XLI can break the resistance and stay above the $25.445 in Sept / Oct before I put my money into this fund.

Citigroup – Insiders buying in August 2009

Citigroup Chairman of the Board, CEO of Citibank N.A & 3 Directors were the insiders who bought Citigroup shares last month. The Chairman & the CEO bought 1 million shares each at $3.21 and $3.41 respectively. It is a good sign when insiders purchase their own company’s shares because they know the company’s business much better than any investors. This is also a good indication for investors to take long position of this stock.

Stock’s Background

  • 3 years historical high = $55.08
  • Current Price = $4.68

Note: The stock price is unlikely to go back to $55.08 because the fundamental of the company has changed. Citigroup is still losing money this year.

I am waiting for a right time and right price to buy this counter for long term investment.
My plan:

  1. Wait and see whether the stock price can hold above $4.26 and the 20D and 50D MA support trend in Sept. If the stock price continues to stay up after big Dow Jones & S&P500’s correction, I will consider to buy at the price near $4.26 in Oct.
  2. If the price breaks the $4.26 support level,  my entry target is around $3.65. I need to make sure all the Technical Indicators do not show bearish convergence and the stock price is not on the down trend.