Toot toot! Afterpay runs into index day

Beware the Afterpay train this week.

The tearaway will be included in the MSCI Australia Index at close of business on Friday which is likely to mean one thing: buying.

Equities desks have been readying clients for the past fortnight or so, which has only fuelled the stock's dramatic rally. There's sure to be big volume all week, especially after market on Friday.

There's likely to be buying from index huggers, who trade based on MSCI's recommendations, and the offshore types who wait for MSCI to name something in a country index to take the stock seriously.

Hedge funds have also wound back shorts to prevent a nasty squeeze. Short bets were worth 1.67 per cent of issued shares, according to ASIC data as at May 19, down from 5 per cent when the market was near its bottom in late March.

Evolution Mining and Northern Star Resources are also rallying in the same vein, and also await MSCI Australia inclusion on Friday afternoon

Bell Potter's Richard Coppleson - an Afterpay shareholder - reckons rises like this are often followed by a fall. He says buying for MSCI inclusion typically lasts for a few days after the changeover, before the sellers hit it. And the sell-off could last a few weeks, he says.

Afterpay shares gained 9 per cent to $48.50 on Monday.

It's just another game around rocks or diamonds payments play Afterpay. It's a game that continues to hit plenty of fundies' hip pockets.

Once the MSCI date passes, it'll be into June, which could also see some peculiar trading. Remember it was in the final two hours of fiscal 2018-19 when Afterpay shares tanked 15 per cent last year.