Chewy stock has formed the double-bottom formation


Shares of online pet products retailer Chewy (NYSE: CHWY) has been under the spotlight in the last 2 months after the stock bounced back strongly from its September lows. The stock dropped more than 35% in 2022 and reached a fresh 52-week low of $22 in September.

However, in the last few days, the stock remains undecided as to which way its next directional break will be. The stock gave up some ground last week despite the company releasing robust Q3 earnings results. Chewy released the financial results for the third quarter of 2022 on Dec. 8 after the market closed.

The third quarter results showed uplift signs of continued strong sales growth. The Q3 results beat Wall Street estimates and raised full-year guidance. Chewy reported sales of $2.53 billion, up 14.5% from a year ago. The stock initially dropped after the earnings announcement but later it recovered back to the weekly highs.

“Chewy’s third-quarter results showed accelerating double-digit topline growth, sustained gross margin expansion, and solid free cash flow generation. The fact that we are simultaneously driving top-line growth and expanding margins is yet another proof point of our ability to get big fast and get fit fast, regardless of the macro environment,” CHEWY CEO, Sumit Singh said.

$CHWY technical outlook​

The stock is set to bounce and rebound over the long term If the company fundamentals trend in a positive direction and overall market sentiment improves. Chewy stock has now formed a perfect double bottom and built a support zone at $22, and as long it can remain above this zone, we can expect further recoveries. On the downside side, the bears need to see a confirmed break below the crucial support $22/20 area to objectively tell us that the recovery has ended. And for the short term, the immediate support at $39.50 followed by $36.

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