DailyPlay – Opening Trade (CHWY) – June 10, 2025

CHWY Bearish Opening Trade Signal

Investment Rationale

Investment Thesis:
Chewy Inc. (CHWY) has staged a notable rally ahead of its earnings announcement before the market opens on Wednesday, June 11, but the sharp bullish run appears overextended, particularly given weak underlying fundamentals and elevated valuation multiples. With the stock trading near the top of its 52-week range and relative strength at a maximum of 10/10, the potential for a short-term reversal is increasing. A bearish counter-trend setup into earnings offers a tactical opportunity to fade the recent strength, especially considering signs of waning momentum and stretched price action.

Technical Analysis
CHWY has been in a strong uptrend since mid-April, with price accelerating above the 20-day and 50-day moving averages. However, the stock has now reached a potential exhaustion point near $48, the upper end of its 52-week range. The RSI is elevated at 65, close to overbought territory, and yesterday’s sharp pullback on increased volume may mark the beginning of a corrective phase. Should selling pressure persist, key support levels to monitor include the 20-day moving average at $44.23 and the 50-day at $38.79.

Fundamental Analysis
While Chewy has benefited from improved sentiment around consumer discretionary names, its fundamentals remain relatively weak compared to industry peers:

• Forward PE Ratio: 72.37x vs. Industry Median 18.58x
  
• Expected EPS Growth: 0% vs. Industry Median 6.83%
  
• Expected Revenue Growth: 6.54% vs. Industry Median 3.62%
  
• Net Margins: 3.31% vs. Industry Median 6.54%
  

The elevated valuation multiple is difficult to justify with no earnings growth and lower margins, which increases downside risk if earnings disappoint or guidance underwhelms.

Options Trade:
To express a bearish near-term view on Chewy (CHWY), consider buying the June 27, 2025, 46/41 put vertical spread for a net debit, which yields a favorable 2.05:1 risk/reward ratio. With only 18 days until expiration and elevated implied volatility, this spread efficiently captures potential downside through or after earnings without overpaying for premium.

CHWY – Daily

Trade Details

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish Debit Spread

Details: Buy to Open 12 CHWY June 27 $46/$41 Put Vertical Spreads @ $1.64 Debit per Contract.

Total Risk: This trade has a max risk of $1,968 (12 Contracts x $164) based on a hypothetical $100k portfolio risking 2%. We suggest risking only 2% of the value of your portfolio and divide it by $164 to select the # contracts for your portfolio.

Counter-Trend Signal: This is a bearish trade on a bullish stock that has started to show signs of buyer exhaustion after a strong rally and has a higher probability of a pullback on earnings. 

1M/6M Trends: Bullish/Bullish

Relative Strength: 10/10

OptionsPlay Score: 121

Stop Loss: @ $0.82(50% loss of premium)

View CHWY Trade

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

PLEASE NOTE that these prices are based on Monday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

View CHWY Trade