Did you guys notice the S&P 500 quarterly rebalance that happened Friday after market close?
For my new traders out there, the S&P 500 and Nasdaq 100 regularly shuffle the companies that are in the two indexes.
New stocks that are able to meet the market cap and profitability requirements — based on share counts and float — are added to the indexes. The companies that don’t meet the adjusted requirements drop out.
The S&P 500 — the largest tracked index in the world — rebalances on a quarterly basis, while the Nasdaq 100 rebalances each quarter and is reconstituted once a year (when companies move in or fall out).
Like I said in a previous video, when indexes rebalance, professional traders hone in on these moves because there’s a lot of money changing hands.
Going back to the S&P 500 quarterly rebalance from this past week, I told you guys about the different stocks that would be added and/or subtracted from the index. I also told you I would give you a free pick that’s in line with our Burn Notice service…
Those of you who are subscribed to my Burn Notice VIP alerts actually ended up with three great stocks I suggested you trade before Friday’s close.
So today we’ll go over some of the S&P 500 quarterly rebalance additions and deletions of Q1 2021. I also want to cover how I spotted these trades, what I expected the outcome to be and how I strategize each move I made.
The S&P 500 Quarterly Rebalance
One of the biggest subtractions I saw in this S&P 500 quarterly rebalance was Xerox.
Xerox Holdings Corp. (NYSE: XRX) is an American company that sells print and digital document products and services.
I told my Burn Notice members to trade this stock over the last 15 minutes before Friday’s closing bell… and boy did that work out in our favor!
Taking a look at the March 19 daily chart for Xerox, you’ll see that around 3:44 p.m. EST, the stock experienced a huge drop.
It had been trading higher the entire day and then plummeted — going from $25.47 to closing at $24.84. A 2-plus percent move in 15 minutes is big, especially for a stock like Xerox.
So why did the stock react like that?
Because it was about to drop out of the S&P 500, so investors panicked.
Traders quickly scrambled to sell off Xerox in order to buy into new stocks that were part of the S&P 500 quarterly rebalance. And that was the perfect time for my Burn Notice VIP members to strike.
When I went to look at the stock again this Monday morning, I knew we needed to trade out of it within the first hour based on how tepid things were moving during premarket hours.
But that was just one of the stocks that caught my attention during the S&P 500 quarterly rebalance…
Check out my short video below to learn more about the S&P 500 quarterly rebalance — and see how I traded it. Be sure to share your thoughts in the comments section below. And as always, guys, email any trading questions to jeff@joyofthetrade.com and stay ahead of the markets, especially these choppy ones, by subscribing to our YouTube channel.
P.S. I’ve just discovered a breakthrough trading strategy so powerful, I’ve already used it to signal 20%, 30% and even 50% winners overnight…
How do I do it? By simply buying certain stocks right at the market’s close and then selling them again the next morning.
You see, almost every day there’s a 3 p.m. EST market phenomena that I call a Burn Notice.
Spot a Burn Notice at the end of the trading day and you could end up grabbing double-digit returns the very next morning.
