Insider Stock Sales Continue To Soar

09/26/03 01:21:53 PM

by Matt Blackman

The ratio of insider share sales to purchases jumped threefold from August to the first week in September. It more than doubled again in the second week of the month.

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Last week in my article entitled "Insider Stocks Sales Figures Tell a Troubling Tale", I commented that insiders were dumping shares in record numbers. The ratio of stocks sold to purchased set a new record in August but jumped nearly fourfold in the first week of September to an incredible 192 share sold or planned to be sold for every one purchased.

The trend continued for the second week of September with the ratio more than doubling again to 415. This means for every share of their company's stock purchased that week in the market by insiders, they sold or planned to sell 415.

When asked about the significance of the recent jump in insider selling activity, Jon D. Andersen, president of Maridome International LLC, which provides a wide array of market data for professional and retail clients, said "The increase in insider selling is alarming to say the least. These extreme levels are unprecedented. Our research focuses on price-independent indicators to create an edge. When indicators like the insider selling statistics reach extremes, technically based systems have higher hit rates."

Insiders sold 2.94 billion shares of stock, announced plans to sell a further 956 million versus just 9.4 million shares purchased for the week ending September 12th. This compares with 3.95 billions sales and another 460 million planned sales to 24 million purchased the previous week according to the Wall Street Journal.

Figure 1 � The weekly ratio of insider share sales or planned sales to purchases between May and September 2003. Data provided by the Wall Street Journal.

Matt Blackman

Matt Blackman is a full-time technical and financial writer and trader. He produces corporate and financial newsletters, and assists clients in getting published in the mainstream media. He is the host of TradeSystemGuru.com. Matt has earned the Chartered Market Technician (CMT) designation. Find out what stocks and futures Matt is watching on Twitter at www.twitter.com/RatioTrade

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