It has not been a great 12 months for the Spreadbetting / CFD shifting community. This has largely been because of the new ESMA rules regarding retail investor trading / gambling, which they dutifully accepted without a bleat last August. The long and short of the directive is that gambling on the financial markets is now regarded as worse than smoking, Class A drugs, or even eating a Krispy Kreme doughnut. One notes new moves to ban trading in Crytocurrencies reported in the media.
This point is witnessed by the way that under every advertisement we are told how many people lose money with the provider, for instance, 70%. The Battle of the Somme probably had better statistics. Strangely enough, there has not been the equivalent financial warning on Marriage “you will lose 50% of your money.” Presumably, that will arrive eventually.
But getting back to the Spreadbet brigade, they waved on the ESMA rules like turkeys for Christmas, and most saw their share prices halve. Surprisingly, the lockdown on dissent was so tight that this only happened after the rules came in, so there was plenty of time to go short. It is now easier for a camel to pass through the eye of a needle, than for a professional investor to open an account and get access to the kind of leverage available before last year.
However, with every disaster there is an opportunity. In the case of Plus500 the stock is less than a third of what it was before the crash, and a sustained break of a February resistance line at 605p could be all that is required to deliver a rally towards 800p resistance. The technical stoploss need be no lower than 550p July support.
More interesting than this, given the pain in the sector one would expect to see consolidation, with plenty of rich pickings to be had. Perhaps a US counterpart such as Gain Capital (GCAP) (owner of CityIndex) might fit the bill, given that its market cap is only around a fifth of Plus500’s?