CHWY Could Take a Bite Out of More Record Highs

There's plenty of pent-up pessimism surrounding CHWY still

Digital Content Manager
Jul 6, 2020 at 1:07 PM
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The shares of online pet supply retailer Chewy Inc (NYSE: CHWY) are up 0.7% at $47.42 at last check, enjoying a 62% year-to-date lead. And while the 20-day moving average is still looming up ahead, keeping a clamp on the shares this month so far, a historically bullish trendline a little lower down the charts could help topple this ceiling in the coming weeks.

Specifically, CHWY pulled back to its 40-day moving average after a lengthy period above the trendline. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, two similar signals have occurred during the past three years. CHWY enjoyed positive returns one month after each signal, averaging a 30.7% gain. A similar move from its current perch would put CHWY just below the $62 level, which marks untouched territory on the charts. 

Nonetheless, there is still plenty of pent-up pessimism surrounding CHWY. While short interest is slowly unwinding, down 0.8% in the last reporting period, the 16.66 million shares sold short still represent an eyebrow-raising 31.1% of the stock's available float. In other words, it would take almost four days at Chewy stock's average pace of trading to buy back these bearish bets. Meanwhile, the equity's consensus 12-month price target of $54.09 is a steep 13.3% premium to current levels.

On the other hand, calls have been popular in the options pit of late. The equity sports a 50-day call/put volume ratio of 3.81 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits higher than 96% of readings from the past year, meaning options players have rarely been more call-biased in the last 12 months. 

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