London, United Kingdom - October 05, 2018: Screenshot of Robinhood Markets, Inc.'s mobile app Robinhood - Investing, No Fees.

Robinhood stock price forecast ahead of Gary Gensler’s grilling on PFOF

The Robinhood stock price has struggled in the past few weeks. The HOOD stock is trading at $40.60, which is about 52% below its all-time high. Its total market capitalization has tumbled to more than $37 billion.

Gary Gensler testimony

Robinhood is a fintech company that simplifies how people buy and sell shares, cryptocurrencies, and other financial assets. The company revolutionized the brokerage industry by introducing commission-free trades. As a result, all incumbent companies like Schwab, TD Ameritrade, and E*Trade brought their commissions to zero. 

Robinhood makes its money through what is known as Payment for Order Flow (PFOF). In this, the company is paid by market makers like Citadel and Virtu Finance for all orders it routes to them. For example, when a customer buys Apple shares on Robinhood, the actual implementation is done by these market makers.

Therefore, like Bitcoin, the Robinhood stock price will be in the spotlight on Tuesday as Gary Gensler, the SEC chair testifies before congress. The testimony comes at a time when people and policymakers are torn about whether PFOF is good for customers or not. Some lawmakers have called for the industry to be eliminated or for it to be regulated more. In his prepared remarks, he said:

“I believe payment for order flow and exchange rebates may present a number of conflicts of interest. Around those two key principles, I’ve asked staff for recommendations as to how we can ensure a more level playing field, enhance competition, and improve resiliency in our markets.”

In a statement on Monday, Robinhood’s Chief Legal Officer (CLO) said that the SEC will conclude that POPF is a good thing for customers. He explained that the approach helps customers get a better deal as market-makers compete for their orders.

The testimony comes a few weeks after Robinhood published strong quarterly results. The firm made more than $502 million in revenue in the second quarter as the number of customers rose to more than 22 million. Customers deposited more than $10 billion in the company in the quarter.

Robinhood stock price forecast

The 30-minute chart shows that the HOOD stock price has been in a downward trend in the past few weeks. Along the way, the stock has remained below the short and longer-term moving averages for a while. And recently, it moved below the key support at $42.38.  This was the lower side of the descending triangle pattern. 

Therefore, the stock will likely maintain a bearish trend in the near term. However, in the long-term, there is a likelihood that the shares will bounce back above $50.

Robinhood stock price