GDXJ Rebalance and a Rate Hike Dear Reader,
Get your lowball offers (stink bids) ready! Between the GDXJ rebalance and the Federal Reserve’s anticipated rate hike, the volatility in the sector will be extreme this week.
Use this volatility to buy cheap… Put in your stink bids now as a wave of forced selling accelerates between now and next Friday. Since the April 12th announcement of the VanEck Junior Gold Miner ETF (GDXJ) rebalance, traders have pounded some of our favorite gold stocks by selling and shorting.
The forced selling by the ETF in order to rebalance the fund is happening now, effective June 12th through the 16th. The climax will be on the 16th at the end of the trading day. This is where your lowball offers could potentially be picked up.
Simply use a limit order that is below the current trading price, make sure it’s “good until canceled,” and hope it gets filled. The snap back amongst these stocks will be aggressive, in our opinion. I’ll expand more on this soon in a special report this Friday.
Due to the success of the VanEck Junior Gold ETF, they were unable to comply with U.S. and Canadian regulators, so in order to accommodate all of the capital flowing into this young precious metal bull market, they will be increasing the amount of companies in the ETF by 44%.
In order to do this, though, the ETF will be selling many of its current holdings, which is why we’ve seen many names get crushed since April. This has been due to traders, funds, and short sellers front running the ETF’s forced selling that will happen this week.
You see, an ETF doesn’t care about what price it buys or sells at – its job isn’t based on performance, but to track the sector.
This is literally forced ignorant selling.
The recent price declines in the companies it holds have had nothing to do with the actual businesses.
This has created many great values in the gold sector that could get even better by the end of the week.