Should you buy a stock after a big jump, a breakout or insider buying?
Didn't work · 21 Oct 2026 · 5 min read
Short answer: No. A month after a big jump or a breakout, the stock had on average done slightly worse than similar stocks, once trading costs were paid. After insiders bought, it did no better.
Three moments that make traders buy
Some days a stock simply grabs your attention:
- It jumps. It opens 5% or 10% higher than yesterday, on huge trading volume, usually after some news.
- It breaks out. After a big run-up and a few quiet weeks, it suddenly pushes to a new high.
- The boss buys. The company's chief executive, or several of its directors, buy shares with their own money.
Each of these feels like a signal. The jump says "something good just happened". The breakout says "the next leg up is starting". And who knows a company better than the people running it?
I wanted to know whether buying right after these moments actually pays. So I found every case I could in US stocks from 2010 to 2021: over 40,000 of them.
How I checked
For each case, I imagined buying the stock at the next morning's opening price. That's the earliest a normal person can act: you only know a day had a big jump or a breakout once the day is over, and you only hear about insider buying when the official report comes out.
Then I compared the stock with a group of similar stocks over the next month (three months for insider buying). Similar means about the same company size, a similar recent track record, and similar day-to-day swings. This matters: stocks tend to rise and fall together, so a stock going up after a jump proves nothing unless it beats comparable stocks.
I also charged realistic trading costs. Buying and later selling cost about 0.5% on average, more for stocks that trade less.
The test covered every US stock priced at 5 dollars or more that traded at least 5 million dollars a day, including companies that later went bust or were bought out. Leaving those out would only look at the survivors and flatter the results.
The exact definitions
- Big jump: the stock opens at least 5% above the previous close, and trades at least three times its usual dollar volume that day. I also tried a stricter version: a jump of at least 8% where the stock keeps at least half of that gain by the close.
- Breakout: the stock has risen at least 25% over about three months (40% in a stricter version), then moves in a narrow band for three weeks, then closes above that band on busier trading than usual.
- Insider buying: either at least two insiders buy within a month, 100,000 dollars or more in total, or the chief executive or finance chief alone buys 100,000 dollars or more.
What happened
Picture putting 10,000 dollars into the stock the morning after each moment, and the same 10,000 dollars into the group of similar stocks. Here is how much more or less the stock left you with, on average, after trading costs:
| The moment | How many cases | A month later, vs similar stocks |
|---|---|---|
| Jump of 5% or more | 12,626 | 80 dollars less (−0.80%) |
| Jump of 8% or more that held half its gain | 6,106 | 78 dollars less (−0.78%) |
| Breakout after a 40% run-up | 4,392 | 71 dollars less (−0.71%) |
| Breakout after a 25% run-up | 13,390 | 68 dollars less (−0.68%) |
| Two or more insiders buying | 3,123 | no difference (0.00%), after 3 months |
| Chief executive or finance chief buying | 2,313 | 4 dollars more (+0.04%), after 3 months |
With thousands of cases, these averages are reliable. For every jump and breakout version, even the most optimistic estimate was below zero: buying after these moments really did leave you slightly worse off. For insider buying, the result could have been a bit positive or a bit negative; the fair summary is "no difference".
Where did the money go?
Mostly to trading costs. Before costs, buying after a jump or breakout was only 10 to 30 dollars per 10,000 behind similar stocks. Paying around 50 dollars to trade turned that into 70 to 80 dollars behind.
Changing the details didn't help. Holding for a week or three months instead of a month, buying at the close instead of the next morning, doubling the costs, or comparing with all stocks or with stocks in the same industry: for jumps and breakouts, every version came out at zero or below.
The special day didn't matter. Buying the same stocks on random, ordinary days gave about the same result as buying right after the jump or breakout.
The insider-buying twist
Stocks bought by insiders did about the same as similar stocks. But compared with their own normal days, they looked better, and the reason is interesting: these stocks had usually been doing badly, falling behind similar stocks by about 1% to 1.5% over three months. Insiders seem to buy when a slide is ending, not just before a rally. That's a fair sign the stock has stopped falling, but not a reason to expect it to beat the market.
Things I noticed along the way
These came from slicing the results afterwards, so treat them as hints:
- Jumps with real news held up better. Jumps on the day a company reported its quarterly results ended about even after costs. Jumps with no such news tended to fade, by 1% to 2.5%.
- The wildest stocks did worst in every version.
- The move happens before you can act. Buying at the open of the jump day itself would have done well. But you can't do that: you only know the day had huge volume, and where it closed, after the fact.
What I took from it
A big jump, a breakout or a boss buying shares is news that everyone sees at the same moment, and the price adjusts the same day. By the time an ordinary investor can buy, the easy part of the move has already happened, and trading costs take what's left.