Beware of Executives Selling Shares.

The daily ups and downs of the market are for the most part beyond our control.

Yet the actions of a select few can have a direct effect on a share price.

The few I’m talking about are executives of Australian listed companies.

Beware of executives selling shares.

When executives sell their shares in a company right before a general meeting, that’s reason enough to pay attention.

It’s a company’s executive who should have the best interests of shareholders at heart.

But as we’ve seen time and time again, and again this past week…

That’s not always the case.

Executives selling their shares is like a red flag to a bull, providing the market with a direct warning sign.

The good news is that you don’t need to be an expert trader to spot this.

Alarm bells should be ringing in your head when an executive sells their shares.

When those at the top of a company are selling… well to use a fishing analogy “There is a portent of stormy weather ahead to which we had better give heed.”

However, there is some good news though.

When it comes to selling shares, executives are obliged to inform the ASX, both when they buy and again when they sell.

So smart traders like yourself should be keeping an eye out for these announcements.

It’s not a complicated process, in fact it’s as simple as scanning your portfolio on the ASX once a day.

And it shouldn’t take you more than 5 minutes to do so.

After all… you don’t want to be left holding the bag when a company’s executive is running for the exits.

Remember, executives are in a unique position which gives them oversight of a company.

By selling the bulk of their holdings in the company, it’s a direct vote of no-confidence in the future direction of the business.

For smart traders, it’s hard not to be sceptical when executives sell off their shares right before an announcement. Especially when it’s done within a short time frame.

However, while this year has had a few memorable moments, it’s not been the shocker that last year was.

2016 was an exceptional year with a number of extreme cases.

Brambles (ASX:BXB) executive Tom Gorman who caused quite the stir when he flogged off his entire stake in the company, to the tune of $8 million.

Then only a few days later the company reported the bad news of a less than rosy outlook, sending the share price tumbling down from $12.79 to $9.78.

Or Vita Group (ASX:VTG) founder Maxine Horne, who sold around thirty percent of her stake in the company for $5.35 a share.

In that case it didn’t take shareholders long to find out why…

A contract with Telstra had gone very pear-shaped and from there it was all downhill. Vita shares now trade at $1.22

Unfortunately we are not privy to the personal financial circumstances of Australian company executives. Nor do we have a crystal ball allowing us to gaze into the future.

What we do have however, because the market forward prices events, is the ability to follow the trends. The upward trend in ASX:VTG peaked in September 2016. The Growth Portfolio, which had been riding that nice trend higher, exited in late October – just below $4.00. It wasn’t an elegant exit at the time, but it’s certainly better than holding tight and hoping for a turn higher from down here at $1.22.