Commodities & Metals

Gold Index Rebalance Means Massive Buy and Sell Volume for 5 Stocks

On the close Friday, the Amex Gold Miners Index (NYSE: GDM) is set for a rebalance. What this means is the index will be rebalanced to reflect reweighting allocations across the stocks that make up the index. It also means there will be some serious buying and selling on the last print Friday.

In a research note, the analysts at Cowen have calculated the buys and sell in the index based on the holdings in the Market Vectors Gold Miners ETF (NYSE: GDX), which essentially mirrors the index and will rebalance. The Cowen analysts estimate there are 24 stocks rebalancing with greater than 50% of 10-day average volume. We screened the list for the five stocks that could see the highest amount of share count buying and had the highest percentage of volume increase over the 10-day average.

The Cowen team points out there is one huge addition to be bought, and four stocks that will see massive selling.

Tahoe Resources Inc. (NASDAQ: TAHO) gets added to the index and the buying will be gigantic. The Cowen analysts estimate that an incredible 14,624,600 shares of the stock will be bought on the close Friday. That represents a mammoth 2,898% increase over the average 10-day trading volume. The company primarily produces silver, as well as gold, lead and zinc. Its principal project is the Escobal project, located in southeast Guatemala. Shares closed trading Monday at $15.01.

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B2Gold Corp. (NYSE: BTG) will be on the sell side big Friday. The analysts estimate that 7,132,200 shares are going to be sold. That will represent a massive 567% of the 10-day average trading percentage amount. B2Gold is a mid-tier gold mining company that explores and develops mineral properties in Nicaragua, the Philippines, Namibia, Burkina Faso and Chile. The stock closed Monday at $1.60 per share.

Sibanye Gold Ltd. (NYSE: SBGL) is another company that will see a high number of shares being sold. It is estimated that 1,693,400 shares will hit the sell tape on the close Friday. That will represent a 244% of the 10-day average trading volume. Sibanye Gold owns and operates underground and surface gold operations in South Africa. The stock closed Monday at $6.20.

Primero Mining Corp. (NYSE: PPP) will have a large pile of shares delivered to the sell desk. The Cowen team estimates that 1,167,300 shares of the stock will trade on the close Friday. That will represent a 244% increase in the 10-day average trading volume. The company is a precious metals producer that engages in the acquisition, exploration, development and operation of mineral resource properties in Canada and Mexico. Shares closed Monday at $4.26.

Harmony Gold Mining Co. Ltd. (NYSE: HMY) will see an avalanche of shares being sold Friday. The analysts estimate that 3,278.400 shares will be sold on the close. That represents a 229% increase in the 10-day average trading volume. The company is engaged in the exploration and mining of gold in South Africa and Papua New Guinea. The stock closed Monday at $1.35.

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While it is no secret that these buys and sells will be made, and some may front-run the actual event, it also gives traders a chance to have market-on-close sell or buy orders in to match up with all the liquidity in the shares. For those looking to buy any of these stocks, the huge numbers of shares sold should move the price down some and could make for an attractive entry point.

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