Insider Buying at 52-Week High
"If you see insiders buying their stock when it's at its fifty-two week high, that is a clear sign to me that I want in," Cramer said.
That's because insiders are typically senior level managers who have an intimate understanding of the business and its future prospects. And when insiders buy at an all-time high, they're effectively saying despite the gains, business is so promising there should be more gains to come.
"There is nothing more arrogant nor telling than when an insider backs up the truck for his own stock when it's sitting at a fifty-two week high. Think about it. They're saying: 'yeah, we know we rock. Our stock has been en fuego, and we're so darned confident that it'll keep going higher that we're not waiting for a pullback. We're buying at the high.' Arrogant sure, but this is bankable hubris," Cramer said.
Insider Buying Heavily Shorted Stock
This second circumstance is a little trickier. It involves a large volume of insider buying of a stock that's otherwise heavily shorted. "It's almost like drawing a line in the sand," Cramer explained. "It's as if the executives are saying our stock goes this low, and no lower."
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That too, Cramer thinks is a buy signal, however he cautions that stocks with large short interest are not for the faint of heart. The subsequent price action can be volatile.