Ollie's Higher After Being Added To S&P SmallCap 600

Ollie's Bargain Outlet Holdings Inc OLLI shares are trading higher by $1.07 (3.8 percent) at $27.38 in Tuesday's session. The rally can be attributed to the announcement that the company will be added to the S&P SmallCap 600 after the close on October 5.

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

Fund managers that do not own the issue will be forced purchase shares of the issue before the conclusion of trading on Wednesday.

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.

Following a sharply higher open ($27.50 vs. Monday's close of $26.32), it has traded in narrow range ($27.31 to $27.55). If the rally continues through the current high, there may be additional resistance at the pair of higher just under the $28 level from September 2 ($27.87) and September 3 ($27.98).