Insiders are those people who are members of the company of the company – the directors and the senior executives who have a portion of the stocks of the company. And naturally so, when these people are selling off their stocks, others become concerned about the financial health and stability of the business and the company. It has in recent times been seen that this is what is happening in the Australian Securities Exchange.

Though these people are not future tellers, but they often have inside information and access to the company data – the sales figures, the production and stocks unsold etc. and so when they feel that it is time to sell the stocks off, it becomes a cause for concern. Of course at least some of the insiders might just be selling off to raise some money, and if it was a one-off case, or something far and between then there is no reason to be bothered. But if quite a few are doing this, then it definitely raises an eyebrow.

The bad news is, it seems that this is what is happening in the Australian Securities Exchange now. But truly, this is not something that is happening just in the ASX, insiders are selling off their stocks in all the major exchanges in the world.

The Impact Of Insider Selling On Stock Market Trading

The big rise in the number of insider selling’s, when it happened the last time was just before the stock markets across the world started their painful and long decline. So can we see a pattern here? Just when it seems that the economy is perhaps doing better having absorbed all the stimulus packages, and investor confidence is coming back, this insider selling can pull the stock market down. After all, if the insiders are lacking in confidence in the stock, how can the investors retain their own confidence?

Analysts are of the opinion that insider selling’s happen whenever there is a difference between the market sentiments and what the reality is, and often it is also guided by the gut feelings of the person. It can of course work positively when the market does not think too highly of the stock, but the insiders know that given the company’s performance, the stock is undervalued. But this definitely is not the case now.

The economy is doing better now than 6 months back and the stimulus packages seem to have helped. But this does in no way mean that all companies are doing better. Perhaps some of them are nearing their threshold levels when they cannot absorb any more losses, or the sales revenues are so close to the break-even point that the business does not look attractive any more. This is not good news and it lowers the insider sentiments no doubt.

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