While the reaction seems great, bulls may be a bit disappointed by the way shares have traded on the day since Chewy was up about 15% in early trading.
Although it still sports a respectable gain, watching those gains get cut in half is likely tough for investors. Particularly when the company delivered a top- and bottom-line beat.
In fact, Chewy delivered a surprise profit in the quarter.
That has analysts praising the results, even though we’re not seeing much follow-through in the share price.
However, this type of post-earnings response isn’t entirely surprising. We saw similar price action from Amazon (AMZN) - Get Report, Shopify (SHOP) - Get Report and other e-commerce plays despite solid results.
Let’s see what the charts look like.
Chewy was in a rising wedge pattern, which allowed it to rise to new all-time highs. On the flip side though, shares cascaded lower once that pattern broke.
The 50-day moving average didn’t provide sufficient support, as the 10-day moving average continued to squeeze Chewy lower.
With the post-earnings rally, we’ve got some pros and cons developing.
On the plus side, Chewy effectively found support in the mid-$70s and cleared short-term resistance near $88. Further, it’s back above the 10-day moving average.
Unfortunately, it’s fading rather hard from its post-earnings high. Additionally, the 100-day and 21-week moving averages — which were strong support in November — acted as resistance on Wednesday.
That leaves us watching a few areas now. Specifically, bulls want to see Chewy find former resistance near $88 to be support. Below risks a test of the 10-day moving average and a gap fill down toward $81.
Below that puts range support in play near $75, along with the 200-day moving average and uptrend support (blue line).
On the upside, look for a close above the 100-day moving average. Above keeps Wednesday’s high in play, followed by the 50-day moving average above that. Over that measure puts $100-plus in play for Chewy stock.