Nail-biting time for Boohoo shares
Once a growth investor's favourite, it could all end in tears for this former AIM star.
7th March 2019 08:58
by Alistair Strang from Trends and Targets
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Once a growth investor's favourite, it could all end in tears for this former AIM star.
Boohoo (LSE:BOO) was last reviewed in November, we'd proposed a drop to 176p, calling it a severe reversal. While not in the retail calamity league of Debenhams (LSE:DEB) etc, there was something distinctly fragrant about what happened when it reached our target level.
As the inset shows (below), the share price obligingly reversed to our target level, crucially not breaking it for seven entire sessions. As a result, it would have made sense to anticipate a bounce was coming. Unfortunately, on December 17th, the market delivered an early Xmas present to traders by forcing the price down at the open with the circled gap, reaching a painful 146p before the price was bounced.
Despite the share recovering to 200p in the period since, we're now rather nervous as to what the future holds.
If we take the attitude a new trend was formed, the day the price was manipulated downward, there's now a severe risk of any future break below red (154p at present) and this allows weakness to an initial 130p. Worse, if broken, bottom looks like proving to be 104p eventually.
To be blunt, we're already concerned at the method being used to move this lots price and suspect 104p intends make its presence felt eventually, ideally as the point at which a proper rebound establishes itself.
Of course, there's always a chance we're reading too much into the markets decision to gap the price down from 176p. To convince us we're reading the tea leaves incorrectly, the share needs to trade above 192p at present to enter a cycle to 220p initially. Secondary, if bettered, is at a visually believable longer term 251p.
For now, though, our suspicion is this shall end in tears.
Source: Trends and Targets Past performance is not a guide to future performance
Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.
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