Where to next for Magellan Financial?

Magellan Financial Group (MFG) has seen a tumultuous 12 months in which the share price has seen a large fall from grace. The large Australian managed funds company has had a myriad of bad announcements and bad news.  Resignation from key members of its leadership team and an exodus of cash outflows from investors have caused a large drop in price. The question remains, what happens next for the share price?

One of the key catalysts for the drop in share price was the resignation and exit of the former CEO Brett Cairns and MFG’s founder and Chief Investment Officer, Hamish Douglas. Douglas specifically, was the face and the brains behind MFG and its successful operations since its inception in 2006. His exit made the market very uncertain of the company’s next moves as it looks to recover.

Consequently, a large outflow of funds under management occurred as large institutional investors exited their positions in the managed fund. The largest of which was St James Place, which was also Magellan’s largest institutional contract worth $23 billion.

Therefore, the share price for MFG has nosedived from a high of $74.91 in early 2022 to sit at a measly $16.44 as of 14 April 2022, a drop of 82%. The question that remains is how much further it can fall before the market starts to see value again and sentiment starts to change.

Technical Analysis

On the daily chart, the price is showing signs that selling is beginning to slow down. The 50 Period moving average has begun to slightly plateau and the price has found some support after strong volume saw a bounce off $13.00. In addition, the selling volume has dried up and the price has moved into a small uptrend. A key test for the MFG share price will be whether it can break through the 50 Day Moving average and hold above that level. This would mark the first time since July 2021 that the price has been able to stay above the 50 – day Moving Average without falling back down.

If the move can be supported by a strong volume bar it may show a shift towards the buy – side at least in the short term. If this break occurs there is the potential for the price to reach $24.50 or even close the gap to $30.00.

On the shorter 4-hour chart, it can be observed that the price has in recent times used the 50-period moving average as support. As the longer 200 – period MA is still on its way down the 50-period moving average is accelerating towards the upside. Furthermore, it does seem that for the first time since August 2021, a golden cross may occur at least for the short-term, signalling a short-term bullish move. Short – term targets of $22.00 and $24.47 may provide good opportunities on the long side. Conversely, if the price is not able to break through and continues to fall, a breakthrough $13.20 may prove disastrous for the share price offering short opportunities.

MFG has seen one of the largest falls from grace of any stock on the ASX. However, the time for the market to shift its sentiment may be coming soon. MFG is a tradable CFD on GO Markets’ Meta Trader 5 platforms.