Can the Boohoo Share Price drop to 150P? This chart says yes

Summary:

Despite crashing 18% so far this month, the Boohoo share price may have much more downside ahead of it if things don't improve soon.

Despite crashing 18% so far this month, the Boohoo share price may have much more downside ahead of it if things don’t improve soon. Boohoo (LON: BOO) was already feeling the pressure ahead of last weeks first-half trading update. The share price had been falling for six months and desperately needed to give shareholders some positive news. However, despite an uptick in sales in the six months to the end of August, pandemic-related charges crushed the retailer’s profit margins.

On balance, the earnings were pretty good. In the first six months of the year, revenue grew to £975m vs £770m for the same period in 2020. Furthermore, gross profits increased to £533m. However, net profits dropped to £63 million due to rising wages and freight costs. Similarly, the forward guidance warned the headwinds would persist through the second half of the year. The Boohoo share dropped steeply on Thursday and Friday of last week, and the weakness continued yesterday. Subsequently, BOO closed Monday at an 11-month low of 212.7p, a 40% decline year-to-date. Despite the destruction, Boohoo could fall even further if it fails to hold above 197p.

BOO Price Forecast

The daily chart shows BOO broke down from a symmetrical triangle trading pattern last week. The bottom edge of the formation at 255p had been a good level of support recently. The poor forward guidance and the technical breakdown led to an acceleration of selling over the last three days. Notably, the decline slowed, approaching October 2020’s 215p low. Furthermore, below that, the 197p low in July 2020 is the last line of defence.

I consider 197p a must hold level for the Boohoo share price. If BOO drops below the July 2020 low, it should encourage further liquidation, targeting the brand support between 133p and 150p. However, the relative Strength Index is reading 22.96, indicating an oversold price, encouraging consolidation. That being said, until BOO reclaims the uptrend, it will trade with a negative bias. On that basis, I maintain a bearish view with a 150p price target until the price recovers above 255p.