As evidenced by the share price of SelfWealth Ltd [ASX:SWF], the award winning fintech company is experiencing a real growth spurt.
The SWF share price is up 8.57% at the time of writing to trade at 57 cents.
Source: Optuma
What’s happening at SelfWealth?
Among other things, SelfWealth offers a trading platform for a flat fee of $9.50, regardless of position size.
This is an attractive offer in the online trading world.
In the midst of COVID-19, this fee structure has helped the company see massive increases in new accounts being opened.
It was reported recently that during the lockdown, a large spike in new trading accounts were opened.
With everyone stuck at home, some are deciding to try their hand at trading.
This influx of new traders and investors is the key driver in SelfWealth’s impressive results:
- ‘Active traders have increased 235% from 13,856 to 46,445
- Annual trade numbers are up over 299% from 164,999 to 659,131
- Revenue increased significantly in line with the large increases in clients and trading volumes to finish 188% up from $2.81m to $8.08m
- Operating cashflow saw a reduction in cash burn from $3.2m to $147,000.’
Can this continue?
The huge number of new traders rushing into the market can be put down to a few things.
People at home being bored, JobKeeper and JobSeeker payments being higher than usual, and good, old FOMO (fear of missing out).
From the high in February, the market took a nosedive down into March, followed by a bounce back up. This bounce could look like free winnings to the new trader.
Now, with the market flattening out, and government support payments soon to be lowered, these same traders might just find themselves on the losing side of trades, trapped in a sideways market or, worse, riding the price to the bottom in the hope it will come back up.
In some cases, new traders have been using the funds from the early release of their super to try and hit it big in trading,
And if those trades don’t keep making a profit for the traders, things could change for them quickly.
This is a potential risk for the SWF share price.
SWF share price chart
Source: Optuma
From the high of 67 cents in early July, the SWF share price fell back 34.81% to the low in mid-August before starting to head north again.
If the price can continue to move up, then the levels of 56 cents and 60 cents may provide future resistance.
Conversely, should this prove to be merely a small counter trend in the longer-term movement and the price falls back again, then the levels of 50 cents and 44 cents may be enough to halt the fall.
Regards,
Carl Wittkopp,
For Money Morning
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