I last looked at Boohoo (BOO) in my article ‘Buy the breakout at Boohoo (June 25 2020)', in which I suggested that we should look to trade from the breakout level at its then recent high at 433p. However, the stock didn’t break out from this level. Instead – despite it reporting strong trading in its update – it failed to rally and demonstrated weakness.
I don’t always agree with Efficient Market Hypothesis because I am acutely aware that there are many who know things that are yet to be revealed to the market. How often have we seen stocks sharply rally on volume before catching a bid? Or stocks drifting for a week or two on increased volume before a placing?
In this case Boohoo limped along and wasn’t acting the way a business firing on all cylinders ought to be. Less than two weeks later came the accusation that some of Boohoo’s suppliers had been using labour that paid a minimum wage in Leicester’s sweatshops.