In our last piece, we shared our bullish view on the stock market and highlighted the iShares Russell Microcap (IWC*US) chart.
Since that time the index has shaken out investors and bullishly powered back above its 50 day moving average. The microcap index finds itself again trading near all time highs. What’s impressive about this move is it's happened with the pessimistic investor sentiment rolling across Wall Street and Twitter like a smoldering tumbleweed in a post-apocalyptic Mad Max movie.
We like to remind investors that sentiment is important and in fact, it partly figured in our March Twitter stock prediction that weight loss supplement company Herbalife (HLF*US) would rebound. At the time, Herbalife was hated by investors and many condemned it as a scam. Our proprietary Alpha Signals seemed to confirm this when they indicated the likelihood of a year long positive trend.
What’s been satisfying is that since March, hated Herbalife shares have surged more than 50%, making new multi-month highs today. What this proves is that sentiment is well worth examining, whether it’s insiders buying shares- or whether public opinion has reached an extreme towards a company, sector or the stock market in general.
With such poor investor sentiment in place (discounting the likelihood of a further advance) and a market that continues to slowly grind higher, we see the market setting up for a huge run into June with the potential to surprise many investors.
Commodity prices have, on balance, made headway in the last two weeks, as the commodity ETF iPath Bloomberg Commodity (DJP*US) rose as much as 10% in the last 3 weeks and has more importantly, and remains above its 50 day moving average support. This is important because if we’re going to see a speculative rally in the broad market we’re likely to see this reflected in climbing commodity prices.
Today we’re going to look at a few stocks with insider activity:
In our last piece, we looked at insider activity in Fission Energy (FCU) and Cameco Corp (CCO, CCJ*US). We do wish to update there was renewed activity in Fission Energy, with 4 different insiders buying nearly 170,000 shares in late April. Almost of the shares were prospectus buys. And it should be said Fission is one of our favourite take-over candidates in the uranium sector. Cameco Corp reported one recent insider trade, John Clappison a director sold 1200 shares, 100% of his stake at $20.01.
We also learned one of our favourite uranium producers Uranium Energy Corp (UEC*US) saw 5 different insiders buy a total of 28,000 shares since May. Importantly, these buys came on the heels of a blistering 61% one-month rally which our Hedgehog Trader Newsletter (HHT) subscribers rode before ringing the register. Also, there were no insider sales after that powerful surge, so insiders appear quite bullish. We’ve recently re-recommended the stock.
Avalon Rare Metals (AVL, AVL*US). If we’re going to see speculative stocks soar, one that might catch a bid is Avalon which owns the largest heavy rare earth elements (REE) project outside of China. Shares spiked over 40% soon after our micro and nanocap advisory Hedgehog High Roller (HHHR) made Avalon a recommendation. Shares have since retreated to where CEO Donald Bubar went on a buying spree in November and December. He picked up over 300,000 shares between 21 and 27 cents. Insiders have sold no shares. It's worth noting one of the causes of the huge April spike was a temporary break of Avalon's long-term downtrend and resistance line falls - its 200 day moving average, currently at 27 U.S. cents. A financing at those April highs brought shares down to earth- but with the company now cashed up, a pair of closes at 28 U.S. cents or higher could ignite a similar rally.
(Disclosure: Nicholas owns none of the companies mentioned.)
An earlier version of this blog was posted before the market open today for subscribers at INKResearch.com
Nicholas Winton uses proprietary signals to forecast likely moves in stocks and commodities and is the editor of Hedgehog Trader where he runs Hedgehog Trader Newsletter (HHT) his flag-ship advisory that provides insightful trading ideas, with a big picture view of the markets and commodities; and Hedgehog High Roller (HHHR) which covers exciting microcaps and nanocaps; Nicholas also consults for fund managers and private clients.