Avis Leaps After Being Added To The S&P Midcap 400

Avis Budget Group Inc. CAR shares are trading higher by $2.74 (6.5 percent) at $37.82 in Friday's session. The rush to own the issue is that the company will replace Questar Corporation STR in the S&P Midcap 400 as of today's close.

Therefore, all fund managers that are 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 that 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.

Fund managers that don't own the issue will be forced to purchase shares of the issue before the conclusion of today's session.

After a higher open, the issue found some intraday resistance ahead of the trio of highs from earlier in the month at the $38; $37.93 stands as the current high. The highest level of the three was from September 8 ($38.32).

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 over the next few days.

For an example of similar price action of another issue, one should take a look at the chart of Charter Communications CHTR, which was added to the S&P 500 on September 7. On that day, it ended the session at $277.56 and is now changing hands at the $266 area. Keep in mind, there has been a steep decline in the broad market during that period of time.

Another example of this price action would be in shares of El Pollo Loco Holdings Inc. LOCO. It was added to the S&P 600 SmallCap after the close of trading on September 12. The day the announcement was made, the issue spiked to $14.60 (September 9) and was added to the index on September 12 at $13.70. At this time, it's trading at $13.13.