The stock sold off immediately in after-hours trading on Wednesday and those losses carried over to Thursday. At last check the Dania Beach, Fla., company's shares were off nearly 9%.
It doesn’t help that Chewy missed earnings and revenue expectations for its fiscal second quarter.
Guidance was about in line with, if not a bit short of, Wall Street's expectations. If guidance had been robust, the missed quarter might not matter as much. But to miss both measures and provide that guidance, well, the selloff isn't surprising.
That said, the analysts are defending the stock.
Luckily for this Real Money contributor, he talked himself out of a long position in Chewy stock just ahead of the report.
For investors who didn’t — or those who are now looking to buy the dip — they want to know where potential support comes into play. Let’s look.
Trading Chewy Stock
Chewy had given us a nice rally from the May lows, when the bear market in high-growth stocks finally came to an end.
While it was riding the 50-day moving average higher, bulls hoped that the pullback into this measure, as well as the 200-day moving average and the weekly VWAP measure, would be enough to support the stock on earnings.
Unfortunately, that's not the case.
The stock is gapping lower on the day and breaking a number of key levels in the process. Among them include the 21-week and 50-week moving averages, as well as the August low.
That gives us a monthly-down rotation, setting the tone for more potential losses.
The one saving grace here would be for Chewy stock to reclaim the August low at $81.65. Back above that mark and Chewy will need to eventually reclaim the 50-week moving average as well.
That would give bulls a reasonable risk/reward setup against the post-earnings low.
Conversely, if the stock continues lower, the $75 to $77 area is back in play. Below that and this name may see $70.
The bottom line is simple: The stock needs to reclaim the August low or investors would do well to avoid it for now.