With Chewy and Petco, Here's Why It's Time to 'Sit'
Let's look at the charts of both stocks after Roaring Kitty gets everyody riled up.
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The stock market has a casino mentality now and seasoned traders should be stepping aside.
Shares of Chewy CHWY and Petco Health and Wellness WOOF jumped initially Thursday afternoon after investor Keith Gill, also known as "Roaring Kitty," posted a dog picture on X, setting off the meme traders. Shares of both stocks rallied sharply for about 15 minutes and then reversed direction.
Let's look at some charts of both stocks and then come to a sobering conclusion.
Chewy
In the daily bar chart of CHWY, below, I can see that prices declined and then made a base pattern before starting to rally. This is what chart watchers like myself like to see. It is a process that we like to follow and can understand. On Thursday prices soared sharply higher but those gains did not last.
In this one-minute intraday chart of CHWY, below, I can see Thursday's price action. From the opening bell prices trade sideways on light volume. This is understandable. Then at 1 P.M. prices explode to the upside on heavy turnover. This burst of strength lasts about 15 minutes before the rally reverses direction.
In this daily Point and Figure chart of CHWY, below, I can see that prices reached a price target in the $38 area. Technically oriented traders who could have accessed this chart may have been quick enough (or lucky enough) to take profits.
Petco Health and Wellness
In this daily bar chart of WOOF, below, I see a chart that is different than CHWY (above) in that prices did not build a base formation before Thursday's rally. Prices made a low in late April/early May but not a base. This stock would not have been on my radar for a rally.
In this one-minute intraday chart of WOOF, below, I can see the same "out of nowhere" rally as seen on the CHWY chart above.
Bottom-Line Strategy
Someone on X or in some chatroom may declare they knew the rally was coming and they played it like a violin. I don't believe it for one second.
This kind of price action is not for me (call me old if you want) and it should not be for you.
Traders who are long CHWY based on my earlier recommendations should take their profits and walk away. I would leave the possibility of instant profits to someone else.
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