$CHWY LONG OUT OF ROUND BASEBREAKOUT OF THIS BOTTOMING PATTERN HAPPENS TO TARGET NEXT OBVIOUS AREA OF SUPPLY, $35.50 OR SO.
CHWY trade ideas
$CHWY Is A Speculative Buy$CHWY is a speculative buy. We are labelling it as speculative because of all the unicorns that have IPO'd this year and have performed horribly. However, a number of people are coming out and saying that the stock is interesting, including Whitney Tilson and Credit Suisse.
Credit Suisse thinks Chewy's (NYSE:CHWY) revenue momentum will translate into profitability down the road.
The firm notes that shares currently trade at only 1.6X the 2020 EV/sales estimate, which it calls a "de minimis premium" to its $22 listing price and a "notable discount" to a broader peer group of e-commerce retail platforms (4.6X), animal health products and services (3.4X), as well as healthcare IT services companies (3.7X). The analyst team says the Chewy share price doesn't fully reflect the rapid growth trajectory and longer-term profit opportunity.
CS has an Outperform rating on Chewy and price target of $29.
In recent trading action, there were concerns over lockup expiration.
Shares of Chewy (NYSE:CHWY) are up 5.22% on the day and are now 17.21% higher over the last five sessions.
On the positive side of the ledger, William Blair was out with positive comments today and The Wall Street Journal's Heard On The Street column maintains that the 1.7 forward sales multiple on Chewy is not unreasonable for a rapidly growing company.
Perhaps most importantly, the expiration of the Chewy IPO lockup period hasn't created a wave of selling today.
Chewy, Inc., together with its subsidiaries, engages in the pure play e-commerce business in the United States. The company provides pet food, pet products, pet medications, and other pet health products for dogs, cats, fish, birds, small pets, horses, and reptiles through its chewy.com retail Website, as well as its mobile applications. It offers approximately 45,000 products from 1,600 partner brands. The company was founded in 2010 and is headquartered in Dania Beach, Florida. Chewy, Inc. is a subsidiary of PetSmart, Inc.
As always, use protective stops and trade with caution.
Good luck to all!
THE WEEK AHEAD: CHWY, LULU, COST, ORCL EARNINGS; EEM, VIXEARNINGS:
It's a fairly light week for earnings, but there is some highly liquid underlyings to play for volatility contraction:
CHWY (--/74): Monday, After Market Close.
LULU (64/42): Wednesday After Market Close.
COST (44/23): Thursday, After Market Close.
ORCL (42/26): Thursday, After Market Close.
Pictured here is a CHWY January 17th 21 short put at the 20 delta, paying .78 at the mid price as of Friday close with a 20.22 break even. In this particular case, I'm not looking to play earnings for volatility contraction, but waiting for earnings to pass, as well as lock up to end, which is supposed to occur on the 11th (Wednesday) with a whopping 83% of outstanding shares subject to lockup. Depending on what happens with the share price at the end of lock up, as well as implied volatility, I will look to put on a play thereafter.
The only other play I'm potentially interested in is LULU, where the January 17th 190/200/260/270 iron condor is paying 2.61 with delta/theta metrics of -1.69/5.35. It's not a one-third the width setup, but LULU has had a tendency to move, so my inclination would be to go wider to stay clear of potential friskiness.
EXCHANGE-TRADED FUNDS:
UNG (55/54)
TLT (44/13)
USO (21/30)
GLD (19/10)
GDXJ (18/27)
With the possible exception of UNG, shorter duration premium selling isn't ideal here, with rank below 50% and 30-day below 35%.
As an interesting aside, however -- compare and contrast premium selling in UNG and USO versus trading /NG and /CL directly, using at-the-money short straddle pricing:
UNG January At-the-Money Short Straddle: 2.68 versus 18.03 (14.9%)
/NG January At-the-Money Short Straddle: .309 versus 2.25 (13.1%)
USO April At-the-Money Short Straddle: 1.75 versus 12.32 (14.2%)
/CL March At-the-Money Short Straddle: 6.76 versus 59.07 (11.4%)
BROAD MARKET:
EEM (8/16)
QQQ (7/16)
IWM (6/16)
SPY (2/13)
First Expiries in Which At-the-Money Short Straddle Credit Exceeds 10% of Value of Underlying:
EEM: June: --4.48 versus 43.07 (10.4%)
QQQ: June -- 21.49 versus 205.00 (10.5%)
IWM: September -- 20.05 versus 162.83 (12.3%)
SPY: September 34.46 versus 314.87 (10.9%)
As with the exchange-traded funds, short duration premium selling isn't paying here, so your choices are to hand sit or sell in higher implied volatility expiries farther out in time. I've been largely opting for the latter, while simultaneously exercising some restraint as to sizing, since the last thing you want to do is tie up buying power with longer-dated setups, only to have literally nothing left over to take advantage of shorter duration volatility pops. Secondarily, I've been managing these longer-dated setups more aggressively, taking them off in profit in many cases a good deal short of 50% max.
FUTURES:
/6B (60/12)
/NG (55/58)
/CL (21/29)
/6E (20/5)
/GC (19/10)
As with the exchanged-traded funds, volatility is in natty and oil with /NG paying in short duration (January). One thing I noticed is that /CL expiry-specific premium selling doesn't necessarily lend itself to going longer-dated (at least at this moment in time) since implied is about the same regardless of where you go (i.e., January: 28.9%; February: 29.5%; March: 29.3%), so all you're basically getting paid for is duration, as compared to -- for example -- expiry-specific implied in SPY, which generally increases incrementally over time (i.e., January: 14.5%; February: 15.7%; March: 16.8%, etc.). This is not necessarily a bad thing, just an observation of what you're getting by going out farther in time with /CL options versus other instruments that have a sort of expiry-specific implied volatility "term structure."
VIX/VIX DERIVATIVES:
VIX finished Friday at 13.62, with /VX futures contracts trading at 16.32, 17.51, 17.63, and 18.19 in January, February, March, and April respectively. Consequently, the contango environment remains productive for term structure trades in those expiries, although it's apparent that you won't get much trading February over January due to the fairly small differential between where those two contracts are trading at the moment. In practical terms, the February 17/19 short call vertical is paying .65 with a 17.65 break even versus 17.51; the March 17/19, .65, with a 17.65 versus 17.63. In other words, it doesn't pay to go longer in duration (February versus March) here ... .
As before, I'll look to put on bullish assumption plays in VXX or UVXY at extreme lows (these setups don't work well in VIX directly due to /VX term structure) and add bearish assumption in VIX, VXX, and/or UVXY on VIX pops to greater than 20 on top of any VIX term structure trades that I'm working ... .
$CHWY Looks good here, broke the bottom wedge.Broke the bottom wedge with some buying, bullish long term imo.
CHWY BounceCHWY touched its previous all time low today, which is now support at the $22.5 level. End of day it bounced off that level creating a doji candle stick, signaling a change in price direction. I entered in at 22.65 and looking for a target price at the $24-24.5 level, where it will then catch up and run into moving average resistance. Looking for a 5-8% bounce.
Taking a bite of ChewyThe chart may not be extremely bullish but we think it offers a good risk reward long into earnings.
It has not been a disastrous IPO for CHWY with reasonable stability in the stock price.
Currently sitting at the bottom of a well defined channel, we think the next move is up.
Folks love their pets and spending is set to soar in the coming years, CHWY also offers a specialized service that AMZN may not be able to beat.
COMPANY PROFILE
Chewy, Inc. operates as a web-based, pet supplies e-tailer. The company is an online source for a wide variety of pet products, supplies and prescriptions for dogs, cats, fish, birds, small pets, horses, and reptiles. It serves its customers through its retail website, www.chewy.com, and its mobile applications. The company was founded by Ryan Cohen and Michael Day in September 2011 and is headquartered in Dania Beach, FL
CHWYCHWY’s innovation outlook is neutral based on a current score of 29 out of 99, underperforming sector average. Insiders sentiment is positive.
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CHWY CollapseLooks like a failed IPO, earnings next week, could break support before then...
Just watching it for now, but feeling bearish....
CHWY Weekly resistances to be testedWatching CHWY for a test of the resistance in the 35.50 area. Best case scenario for the bulls would be an initial rejection to form a daily higher low off of daily EMA supports and then a weekly breakout, having us look back to all time highs.
That said, bulls remain in full control as long as the hourly uptrend remains in tact.
CHWYFat support around 30.8ish. Have to wait and see how does this move on Monday morning. I am personally expecting a pullback which could extend all the way to the resistance line, slightly bullish overall.
Chewy day trade potentialChewy missed analyst earnings estimates by 1 cent per share, but posted good year-over-year improvement. It's down a lot today, but has support around 31 and could rebound from there. Below the previous low of 30.81 would be a good spot for a stop loss.
Chewy downward triangle breakout, at high volume supportChewy made a downward triangle breakout and will consolidate for a little while. It should find some support at this price level, which in the short time since its IPO has been a fairly high volume level. However, Chewy's fundamentals don't check out. It's an unprofitable company and doesn't appear to be making progress toward profitability. It may breach support and fall further.
