Managers Forced To Buy Sally Beauty After Added To S&P MidCap 400 Index

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Sally Beauty Holdings, Inc. SBH shares are trading higher by $1.41 at $28.02 in Monday's session. The catalyst for the rally is the announcement that the company will replace RR Donnelley & Sons Co RRD in the S&P MidCap 400 index after the close of trading on Tuesday.

Therefore, all fund managers using this index as a trading vehicle must add the issue to their own portfolio in order to replicate the returns of the index. Managers who already own the issue for some other reason will have to make sure the size of their position corresponds to the issue's new weighting in the index.

Related Link: Will Amazon Do To Beauty Supply Shops What It Did To The Book Store?

Fund managers who do not own the issue, will be forced purchase shares of the issue before the conclusion of trading on Tuesday.

Although the surge in price may be temporary, investors wanting to short the issue or exit a long should pay close attention to the price action in the issue over the next few days.

The surge in price has taken the issue to an important resistance area. Following a higher open, it rallied to $28.59, before retreating to the $28 area. That is just shy of a trio of highs from August 4 ($28.81), September 7 ($28.86) and September 8 ($28.67).

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Posted In: TechnicalsIntraday UpdateMoversTrading IdeasS&P MidCap 400 index
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