I'll be honest, I love Watchog and I think he's very underrated and underestimated, but I never would have used him competitively because of his poor stats and abilities. That is, until I tried him in Pokemon Showdown. Here's a set that's worked surprisingly well for me on Showdown for my Watchog.
Nature: Adamant or Jolly
EVs 252 DEF 252 SDEF 4ATK- Let's him take hits better, he'll need it
Ability: Analytic- his only good competitive ability
Item: Focus Sash- Just in case
Confuse Ray- Confuses the target. Might also force a switch.
Thunderwave- Paralyzes the foe. Also might force a switch.
Knock-Off/Bite-This move got a huge buff this gen. It removes the opponent's item for the whole battle while also dealing some pretty sick damage to it too./Let's you paraflinch ghosts for super effective damage and now steel-types for neutral (in yo face Metagross >:^3)
Hyper Fang- STAB, chance to flinch
This Watchog set is a para-flinch set that also makes use of confusion to future annoy and debilitate opponents, which is what Watchog does best IMO. Start by using Thunderwave to paralyze your foe and then Confuse Ray to confuse it. If my facts are straight-- by using Hyper Fang the opponent will only have a 15% change to attack while Paralyzed and Confused, and with Bite, it would be -5%! Watchog might have bad stats, but if your opponent can't attack it doesn't really matter does it :) I took out a Mega-Scizor single-handedly using this set. A MEGA-SCIZOR!! If Watchog ever got a Mega with Serence Grace it could bring Watchy up to at least UU easily.
Counters: Ground-types. Eletric-types. Entry hazards. Burn/Poison damage. Pokemon with Limber, Steadfast, Inner Focus, Synchronize or Own Tempo.