Historic Signal Says Chewy Stock Has More Room to Run

Pet e-tail stock Chewy Inc (NYSE:CHWY) is 0.2% higher to trade at $37.50 last glance, while sporting a 29.2% year-over-year lead. The $36 level emerged as a floor for CHWY after a pullback from an early September rally to its highest level since late June. Now, a longer-term trendline that coincides with that level of support indicates the shares have more room to run.

Per Schaeffer's Senior Quantitative Analyst Rocky White, the equity is within 0.75 of the 260-day moving average's 20-day average true range (ATR), after spending at least 80% of the last 10 days and 42 days above this trendline. This has happened six other times over the last three years, after which the stock was higher one month later 83% of the time, averaging a 12.4% gain. A move of similar magnitude from the equity’s current perch would put it back above $42.

The security could benefit from an unwinding of pessimism in the options pits. This is per CHWY's Schaeffer's put/call open interest ratio (SOIR) of 1.02 that stands higher than all readings from the past year

These options are reasonably priced. Chewy stock's Schaeffer's Volatility Index (SVI) of 42% ranks in the 19th percentile of its annual range, meaning options traders are pricing in low volatility expectations.