Chewy Soars 4.27% on Institutional Buying Frenzy: Is This the Start of a Bullish Rebound?

Summary
• Chewy (CHWY) surges 4.27% to $34.17, hitting a 52-week high of $34.85
• Institutional ownership jumps to 93.09%, with $16.48B in inflows over 12 months
• Options chain shows explosive implied volatility (up to 518.50%) and leveraged call options trading at 6772% leverage ratios

Chewy’s intraday rally has ignited a frenzy among institutional investors and options traders, with the stock surging 4.27% to $34.17. The move follows a surge in institutional buying, including a $16.48B inflow over the past year, and a volatile options market where leveraged call options trade at stratospheric ratios. As the stock tests its 52-week high, the question looms: is this a sustainable rebound or a short-lived spike?

Institutional Buying Frenzy Drives CHWY's Sharp Rally
Chewy’s 4.27% surge is fueled by a wave of institutional inflows, with 334 buyers adding $16.48B in the past year. Key players like Allspring Global Investments and Vanguard Personalized Indexing Management have significantly increased stakes, while options data reveals a stampede into leveraged call options. The 34-strike call (CHWY20260123C34) has seen 60,106 contracts traded, reflecting aggressive bullish bets. This institutional stampede, combined with a 2.41% turnover rate, suggests a coordinated push to capitalize on the stock’s rebound from its 52-week low of $29.825.

Internet Retail Sector Mixed as Amazon Drags, Chewy Defies Trend
While Chewy defies gravity with a 4.27% rally, the broader Internet Retail sector remains under pressure. Amazon (AMZN), the sector’s bellwether, trades down 0.23% as investors digest mixed holiday sales and AWS outages. The sector’s divergence highlights Chewy’s unique appeal: its 93.09% institutional ownership and recent inflows contrast sharply with Amazon’s retail struggles. However, Amazon’s dominance in e-commerce fundamentals could cap Chewy’s upside if broader consumer spending trends sour.

Options Playbook: Leveraged Calls and Gamma-Driven Bets
• 200-day MA: 37.43 (above) • 50-day MA: 33.01 (below) • RSI: 54.27 (neutral) • MACD: -0.236 (bearish) • Bollinger Bands: $31.29–$33.83 (current price above upper band)

Chewy’s technicals present a high-risk, high-reward setup. The stock trades above its 200-day MA but below the 50-day MA, with RSI in neutral territory. The MACD histogram (-0.236) suggests bearish momentum, but the price’s break above the upper Bollinger Band ($33.83) hints at short-term strength. Key levels to watch: 34.85 (52-week high) and 32.15 (30-day support).

Top Options Bets:
• CHWY20260123C34: Call option with 40.61% implied volatility, 44.55% leverage ratio, delta 0.49, theta -0.13, gamma 0.196, turnover 60,106. High gamma and moderate delta suggest strong price sensitivity. Projected 5% upside (to $35.88) yields a 17.3% payoff.
• CHWY20260123C34.5: Call option with 42.12% implied volatility, 58.38% leverage ratio, delta 0.40, theta -0.12, gamma 0.183, turnover 6,259. High leverage and moderate gamma make it ideal for a breakout. 5% upside yields 18.6% payoff.

Aggressive bulls should prioritize CHWY20260123C34 into a break above $34.85. If the 52-week high holds, the 34.5-strike offers a leveraged play on a continuation rally.

Backtest Chewy Stock Performance
The backtest of CHWY's performance following a 4% intraday surge from 2022 to the present reveals disappointing results. The strategy's CAGR is -8.95%, with a maximum drawdown of 72.41% and a Sharpe ratio of -0.14, indicating significant risk and substantial losses.

Chewy’s Rally: A Short-Lived Spike or a New Bullish Chapter?
Chewy’s 4.27% surge is a testament to institutional conviction and options-driven momentum, but sustainability hinges on breaking above $34.85. The stock’s technicals suggest a volatile near-term path, with the 200-day MA acting as a critical resistance. Investors should monitor Amazon’s performance (-0.23%) as a sector barometer. For now, the 34-strike call (CHWY20260123C34) offers the best risk/reward for a breakout trade. Watch for a decisive close above $34.85 or a pullback to $32.15 to define the next move.