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$17.08 northern star resources ltd

Can't see NST holding its share price, page-723

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Downanout

690 Posts.

256

18/03/21

14:06

Post #: 51867556
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Originally posted by nordesmic: ↑

The calculation date for the index was only on 5 March. On 12 March they announced, and on 19 March GDXJ makes the trades to track the index. It was definitely speculated many months ago that NST would be removed once the merger was finalised. My understanding is that the criteria is that the company must be in the 60th to 98th percentile of the gold stock universe by market cap. Interestingly two other constituents of the index have very slightly lower market cap (Pan American and Gold Fields) however are not being removed. My feeling is that this is not to rock the boat too much in one rebalance but they will be removed later in the year.

I've been watching the GDXJ rebalances for about 7 years now. Over time what has happened is that the shorts over play their hand after the deletions are announced (or vice versa with longs and additions). The shorts seem to forget that the GDXJ has been canvassing institutional buyers to offload the stock to well in advance. So on Friday the shorts probably come into the market to close out positions in the auction but are competing with a bunch of large buyers at the same time.

The other complicating element is that the rebalance dates often follow an FOMC meeting a couple days prior which can make gold stocks extra volatile.

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"...and on 19 March GDXJ makes the trades to track the index."

Please, can you point to any source for this particular aspect of your comment?

It just seems unlikely that an ETF would oblige itself to follow the index so rigidly, but I am happy to be corrected.

Cheers

NST Price at posting: $9.35 Sentiment: None Disclosure: Held
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