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This Thursday, Boohoo’s share price is down 0.26% and might be heading for a second consecutive day of losses unless buyers make a comeback in the late UK trading session. This decline follows a rejection at the 96.86 resistance level on Wednesday, after a failed breakout attempt on Tuesday.
The drop in Boohoo’s share price is partly due to a recent EU ruling on waste from the fashion industry. Boohoo, along with Zara, is categorized as a “fast fashion” brand. Under the new EU-wide Extended Producer Responsibility Scheme, these brands could face “waste fees” for every item they sell.
The scheme aims to push fast fashion brands towards more eco-friendly practices. The use of polyester, a fossil-fuel derivative, in clothing has surged over the past twenty years. With people buying clothes more frequently and keeping them for shorter periods, many garments end up in landfills or are incinerated, contributing to global warming and environmental damage.
To avoid these fees, Boohoo and other fast fashion brands will need to make significant changes. This adds another challenge for Boohoo, which has already seen its share price decline as the UK emerges from lockdowns.
Looking at the 4-hour chart, Boohoo’s share price is stuck between the 96.86 resistance and the 85.64 support levels. For the price to establish a new trend direction, it needs to break out of this range. Currently, there is an uptrend, suggesting a potential for bullish movement. For a bullish continuation, the price needs to break through the 96.86 resistance, with a target move towards 128.50. However, this requires overcoming the 109.10 resistance level first. The target of 144.96 remains out of reach for now.
On the downside, if the price falls below the 85.64 support level, it could first target 76.12 (the low from February 24) and then potentially drop to 58.96, a multi-month support level. The low of 52.30 from June 29, 2016, could become a target if the price falls below the July 15, 2016, low of 58.96.