The Boohoo share price remains in a consolidation mode ahead of the company’s trading update scheduled for Tuesday next week. The BOO stock ended the day at 322p, where it has been in the past few weeks.
What happened: Boohoo, the leading online fast-fashion company in the UK has been under pressure lately as the shares have moved sideways for months. This is probably because investors are waiting for further clarity on the processes that the company is doing to streamline its supply chain. Also, they are waiting for more clarity about whether this demand will continue as the UK economy reopens.
Still, fundamentally, the company remains in an impressive pat, as evidenced by the recent strong earnings. The UK labour market remains stable and the shift to e-commerce is accelerating. Most importantly, the company managed to spend a small amount buying some iconic brands from Debenhams. The acquisition will likely lead to better sales this year.
Boohoo will issue a trading statement on Tuesday. In it, the management will provide details of its recent performance and a guidance of what it expects. Analysts will also be focusing on the company’s US business, which has become pivotal for the firm’s growth. In a note, an analyst wrote:
“This region holds the key to future growth for boohoo and, at the full year, US sales rose 63%. boohoo’s spending heavily on expansion at home too, with full-year capital expenditure expected to come in between £125m and £175m, as new UK warehouses and expanding existing facilities have been added to the shopping list.”
The daily chart shows that the BOO share price has struggled lately. The shares are at the same level as the 25-day and 50-day exponential moving averages (EMA), which is a sign of the ongoing consolidation. The stock seems to be forming a descending triangle pattern. In technical analysis, a falling triangle is usually a bearish signal.
Therefore, with the triangle pattern nearing its confluence zone, we can’t rule out a situation where the stock breaks out lower. If this happens, the next key resistance to watch will be at 300p followed by 285p. Nonetheless, a move above 340p will invalidate this price action.
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