Chewy Gaps Down To Pattern Support ... What's Next?

Chewy Inc. CHWY shares were trading lower Thursday after the company reported worse than expected second-quarter financial results.

The company reported a loss of 4 cents per share, missing analyst expectations that called for a loss of 2 cents per share. The company reported second-quarter revenue of $2.16 billion, which also missed analyst expectations of $2.2 billion.

Chewy was down 9.39% at $79.72 at last check Thursday afternoon.

Chewy Daily Chart Analysis

• Shares look to be bouncing off of pattern support in what technical traders call a pennant pattern after gapping down.
• The price saw a large gap down on Thursday where it almost reached pattern support. Pattern support is a key area for the stock, it would need to bounce or it may break out of the pattern to the downward side and could see a further move to the downside.
• The stock is trading below both the 50-day moving average (green) and the 200-day moving average (blue), indicating recent sentiment in the stock has been bearish.
• Each of these moving averages may hold as a possible area of resistance in the future.
• The Relative Strength Index (RSI) pushed lower the past couple of days and now sits at the 35 mark. This means there is more selling pressure in the stock than there is buying pressure.

What’s Next For Chewy?

Bulls would like to see the stock bounce off pattern support and head higher. Bulls would then like to see the stock break above pattern resistance and shoot higher. Bulls are looking for consolidation if the stock could break resistance.

Bears want to see the stock keep falling and to move below the pattern support. Bears would then want to see the stock hold the pattern support as resistance. If this happened the stock could be ready for a bearish push.