The Magpies were beaten 3-2 by an expensively assembled Blues side and held their own for more than an hour at St James' Park.
Watson said: "We frustrated Chelsea for long periods. They took the lead and we showed some great character to get back level then going ahead.
"The work ethic of the players and the discipline of the team we were playing was fantastic.
"We couldn't have asked for any more from our players. They were flat to the boards. That's all we ask from them."
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