Why Nio Stock Looks Set For A Trip North This Quarter

Nio, Inc NIO was trading up about 1% on Thursday, while continuing to consolidate a 17% move off the bottom of $33.17 the stock printed on Oct. 7.

The EV manufacturer, which recently began shipping vehicles to Norway had a rough third quarter, losing 36% of its value between July 1 and Sept. 30. On Thursday, it was reported 110-year-old asset management firm Baillie Gifford lowered its exposure in the China-based company during the period by about 287,255 shares, reducing its original 90.6 million share position by 0.3%.

The stock looks set to make a comeback during the fourth quarter, however, and has printed a number of bullish patterns to start October.

See Also: Companies Like Tesla And Nio Face Tougher Guidelines For Their Vehicles Under Proposed Guidelines In China

The Nio Chart: After hitting the low of $33.17, Nio reversed into an uptrend on the daily chart, putting in a consistent series of higher highs and higher lows. The stock's last higher low currently sits at the $35.60 mark, while the most previous higher high is at $40.89.

Nio is also trading in a bull flag pattern on the daily chart, with the pole created between Oct. 14 and Oct. 19 and the flag formed between Tuesday and Thursday. The measured move of a break from the bull flag, calculated by measuring the length of the pole in terms of a percentage, is just under 15%, which indicates that if the pattern is recognized, Nio could eventually soar toward $45.

There is a gap below on Nio’s chart between $34.16 and $34.93. Gaps on charts fill about 90% of the time, so it's likely Nio will trade down into the range in the future. The stock just recently filled a gap left behind Sept. 8 between $39.95 and $40.50.

Nio may need further consolidation to help cool its relative strength index (RSI), which is measuring in at about 65%. When a stock’s RSI nears or exceeds 70%, it becomes overbought, which is a sell signal for technical traders.

The stock is trading above the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending above the 21-day, both of which are bullish indicators. Nio is trading below the 200-day simple moving average, however, which indicates overall sentiment is currently bearish.

• Bulls want to see continued consolidation on low volume and then for big bullish volume to push Nio up to make a higher high above $41, and then for momentum to drive the stock up over a resistance level at $41.86. If the stock can regain the level as support, it has room to trade back up toward the $45 level.
• Bears want to see increasing bearish volume drop Nio down below the eight-day EMA, which would negate the bull flag. Below the level, the stock has support at $36.61 and $34.06.