The third tech stock showing recent insider sales is EMC Corp. (NYSE:EMC). Within the past three weeks:
- Chairman, President and CEO Joseph M. Tucci sold 396,415 shares at $26.25, generating $10.4 million from the sale. 336,415 of these shares were sold indirectly, and belong to a trust.
- Howard D. Elias, President & COO, sold 44,495 shares for $26.75, generating $1.2 million from the sale.
- David I. Goulden, Executive VP & CFO, sold 25,000 shares for $26.60, collecting $665,000 from the sale.
- Paul T. Dacier, Executive VP and General Counsel, sold 50,000 shares at $27.50 per share, for a total value of $1,375,000.
Click to EnlargeEMC gapped up above resistance on Feb. 24 and has not looked back since. The chart also appears strong, and although RSI and stochastic have been in overbought territory for awhile, the 50-day moving average appears ready to cross above the 200-day moving average — which would achieve the bullish “Golden Cross.”
With the stock acting so strongly, I would again recommend nothing more than maybe raising your stop-loss orders to just below the 50-day moving average, currently at $24.31. But some pullback is to be expected after a 28% run-up year-to-date, and perhaps that is why the insiders at EMC Corp. also are demonstrating caution at these levels.
How to Play a Decline
An alternative to selling, or even raising stops on your long positions, is to buy April 21 puts. For example, the April 21 IBM 190 strike is about $2.75 per contract (each contract controls 100 shares and would cost $275). So, $190 would only be about a 4% loss from current levels. Assuming you own the stock, you also could sell a covered call to offset a decline in price with income.
Remember that no stock should be bought or sold simply because of insider buying or selling. You also should evaluate all stock investment decisions according to fundamental and or technical analysis. However, if your evaluation indicates that a stock’s future upside might be limited, and a recent pattern of insider selling is evident, then it might be time to consider selling your shares or adding options to hedge or generate income against a loss.
Ethan Roberts recently purchased call options on QID, which would benefit from a decline in the Nasdaq 100 stocks, such as MSFT. However, he does not hold a position in any of the aforementioned securities.
All insider transaction courtesy of Yahoo Finance and sinletter.com (Suria Investment Newsletter).