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How To Spot The Compelling Buy Signal In Micrel (MCRL)

How To Spot The Compelling Buy Signal In Micrel MCRL

When corporate insiders are buying their own stock heavily, its usually for good reason - they believe the stock is going up.

Playing insider buying signals is an effective, but often under-utilized way to trade. While sometimes these signals don't pan out, more often than not they are extremely useful for catching a small-cap stock before a big run.

This week, Micrel (NASDAQ: MCRL) flashed a heavy insider buying signal, and its set-up is perfect for a buy this morning.

The ideal setup for buying these insider stocks is this: small-cap stock, extremely oversold conditions in the intermediate term, a period of base / turnaround, positive trending in the short term, and of course, a heavy insider buying signal.

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That's exactly what is seen with Micrel. Micrel spent from mid-July to late-October down-trending, going from highs of $10.76 in the summer down to $8.79 a few weeks ago. The stock seems to have formed a base around the $9 area which just so happens to be the weekly support on its clearly defined long-term trading range.

Micrel has propped up from it's Oct 25 lows to a safer price level around $9.30, which makes for a more comfortable entry point. It's also at the low-end of a long-term trading range with clear upside to $10.40-ish. Given how successful insider buying signals work with small-cap stocks, Micrel is a compelling idea today.

Stops should be set at a close below the Oct 25 low (closing basis) at $8.79. Basically, Micrel has about two weeks to begin trending higher as long as it stays above $9. It is usually easy to see the effect insider buying signals have on price action pretty quick, so a falter in the short-term and close below $8.79 would be enough to cut the trade off.

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Micrel has the right set-up, the right signal, and is sitting at the right price. We think Micrel is a good opportunity and is today's most compelling trade.



When To Consider Entering the Trade:
At the current price (~$9.30).

When to Consider Exiting the Trade:
At a close below $8.74 (Breakdown) / A close at $10.40 or above (Profit-Taking)

Disclosure: At the time of publication the editor and affiliated companies own the following positions: None

Note: Positions may be bought or sold while this publication is in circulation without notice.

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