Boohoo (LON: BOO) share price has been in a downtrend for the past few weeks after a strong rally at the start of 2023. Technical analysis shows that time is running out for the bulls as the selling pressure increases. The price is trading below key support, which is a big red flag in itself.
On Friday, FTSE 100 index was up 75 points as major shares rebounded from their weekly lows. Nevertheless, Boohoo shares remained red for the second consecutive day and closed with a 1.87% loss. The shares also breached a key level which is discussed below.
Why Are Boohoo Shares Falling?
There could be multiple reasons behind the increased selling pressure on the Boohoo stock. The recent rate hike by the US Federal Reserve was followed by a similar move by its European counterpart. The European Central Bank (ECB) raised the interest rates in the region by 25 bps. The move was quite in line with the market expectations, so the markets didn’t have an immediate reaction.
The biggest catalyst behind the negative Boohoo share price action this week appears to be the recent settlement in the class action lawsuit. The online fashion retailer agreed to settle for a whopping $197 million in the US, where it was alleged to give fake discounts.
Boohoo Share Price Drops To Feb’23 Lows
Technical analysis of LON: BOO reveals that bears are gaining momentum as the price has dipped close to its 3-month lows. If the price gains acceptance below the 48.5p level, bears may target the 40p level in the short term. The significance of the 48.5 p level comes from multiple confluences.
These confluences are the March 2023 lows and the 200-day moving average. There is also a strong possibility of a big bounce from this level if the current price action turns out to be a fakeout. The next few trading sessions will be very crucial in this regard.
I’ll keep sharing my updated price outlook on Boohoo & other stocks in my free Telegram group, which you’re welcome to join.