It's important not to forget that company Directors have to live, and that there may be solid reasons for them to raise cash by selling shares.
Divorce, tax issues, school fees, Lloyds liabilities, perhaps a new yacht - there are lots of reasons why they might need to reduce their shareholdings which do not necessarily indicate a lack of faith in the company.
In some circumstances, sales can actually be a positive signal. Where several directors sell a large number of shares it may be that there is such a demand for the shares in the market that the directors are forced into selling some of their holding to improve liquidity. The shares may be available on the open market or are placed with institutional investors.
Example
Rage Software
Where five directors sold over five million shares. This could have been taken as the price having peaked but in fact the shares were sold due to institutional demand and the price has continued to rise. Sales such as these are certainly not a bad thing as it shows the company is attracting interest and demand for the shares is high.
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