CMC Markets share price sell-off could intensify to 150p

CMC Markets (LON: CMCX) share price nosedived on Monday after the company warned of the tough operating environment as it downgraded its forward guidance. Shares of the FTSE 250 company plunged by over 20% to a low of 184.6p. They have dropped by ~67% from the highest level during the pandemic. 

Change of fortunes

CMC Markets, the leading forex and CFD broker, has had a change of fortunes after seeing elevated demand during the Covid-19 pandemic. 

In its trading statement on Monday, the company said that it expects that its net operating income will be between £280-£290 million. It added that March posed a more challenging environment, with lower equity volumes. 

The company also warned that it had a higher proportion of lower-margin institutional trading activity during the month even as market volatility jumped. The statement added:

“Development upgrades across both its investing and trading platforms continue and the expansion in the institutional business remains on track. CMC’s diversification strategy in its investment business advances with CMC UK Invest expanding its offering.”

CMC, like other companies in the industry, benefited during the Covid-19 pandemic as more people shifted to day trading. The company has also partly benefited from the cost of living crisis, which has seen more people start trading. 

However, the trading statement provides more evidence that its business is indeed slowing. In November, the company said that the number of investing customers dropped to 164,632 in the half year ended in September. It had over 185k investing customers in the same period in 2021. Trading customers dropped by 7% to 50,199.

While the number of customers dropped, the company’s met operating income jumped by 21% to £153 million as the trading revenue per active client rose by 36% to £2,588. Therefore, there is a possibility that the company will remain under pressure in the coming months as its business growth slows. 

CMC Markets share price forecast

CMC chart by TradingView

The weekly chart shows that the CMC Markets stock price has been in a strong downward spiral in the past few months. On Monday, the stock managed to move below the important support level at 209p, the lowest level on October 3.

The stock has moved below all moving averages and is slightly above the 78.6% Fibonacci Retracement level. Also, the Stochastic Oscillator has moved below the oversold level. 

Therefore, the path of the least resistance for the stock is downward, with the next key support level being at 150p, which is ~17% below the current level.