Plus500 shareholders probably don’t like to remember the period between August 2018 and April 2019. ESMA’s new regulations hit the CFD trading industry hard and the company was no exception. Over those nine months, the stock fell 81% from 2076 to as low as 397 pence a share.
But Plus500 survived and adapted to the new environment. In fact, 2020’s increased volatility led to its most profitable year ever. The stock is now hovering above 1540 pence a share – much higher than its 2019 low, but still below the 2018 record high. Fundamentally, we believe this is a high quality business that is also currently undervalued. And, after the stock’s recent consolidation, Elliott Wave analysis points north, too. Take a look.
The daily chart above reveals the post-ESMA crash as well as the following recovery. As visible, the surge from 397 to 1660 can be seen as a five-wave impulse pattern, labeled 1-2-3-4-5 in wave (1). It was followed by a shallow correction in wave (2) down to 1234.
The bears appear to have been stopped in their tracks in wave (2) by two lines, which used to serve as resistance in the past. Now, they are serving as support after the price successfully breached them on its way up. If this analysis is correct, we can expect higher levels in wave (3) going forward. Our fair value for the stock lies close to 2400 pence a share. In other words, a new all-time high is plausible from here.
Disclosure: The author holds a long position in Plus500 stock.
Similar Elliott Wave setups occur in the Forex, crypto and commodity markets, as well. Our Elliott Wave Video Course can teach you how to uncover them yourself!