PreMarket Prep Stock Of The Day: Nio

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

There are volatile issues in the market and then there's Chinese electric vehicle manufacturer Nio Inc. NIO, which is the PreMarket Prep Stock of the Day.

Nio A Hot Stock In Hot Sector: With the emergence of Tesla Inc TSLA and its fantastic rally in 2020, several other electric vehicle manufacturers have been along for the ride.

While Tesla has gained 390% from is 2019 year-end close ($83.67 to $409), Nio has added over 1,000% ($4.02 to $44.50).

A majority of Nio’s gain has occurred since July, when it ended the month at $11.94. Its all-time-high was made on Friday at $54.20. Its all-time-closing high was made the preceding day at $48.30.

Citron Makes Bearish Call On Nio: As a result of continued strength in Chinese electric vehicle sales in October and strong earnings from peer XPeng Inc. XPEV, the issue was in rocket ship mode Friday.

After a $3 higher open, it was forging into the $50 handle when noted short seller Andrew Left took aim at the issue.

Around 9:45 a.m. Friday, Left tweeted that Nio's valuation could never be justified and set at a $25 price target for the issue. It should be noted that Left was bullish on the issue two years ago when it was at the $7 level.

Here Come The Nio Sellers: On some occasions, Left’s calls have an immediate impact on an issue, but this was not the case with Nio.

Even though there were plenty of longs looking to exit the issue and aggressive short-sellers looking to pounce, it took some time for the selling to kick into high gear.

From a technical standpoint, Nio was ripe for the picking after its torrid run, and Left’s timing was likely to eventually work in his favor.

At the onset of the initial tweet, the Street seemed to shrug off Left’s call as the issue rallied from the $52 to $54.20 Friday in what stands as the high for the move just after 10 a.m.

Once sellers could not sell into strength, the floodgates opened. The ensuing decline took the issue all the way to $40.55, but it rebounded to end the session at $44.56.

Nio Moving Forward: After a lower open in Monday’s session, Nio rebounded past Friday’s closing price, which is a good sign, reaching $45.83 before reversing course.

So far, the ensuing decline has been orderly and the issue is up more than $2 from the session low.

Nio shares were trading 1.82% higher at $45.37 at last check Monday. 

Based on the daily charts, it appears that the bulls are still in control of the issue, as it has not been able to breach Friday’s low ($40.55), as $41.10 stands as the low for the day.

If that level is breached, the issue may not find support until the trio of lows in the $38 handle, from Nov. 5 ($38.25), Nov. 10 ($38.64) and Nov. 11 ($38.64).

Photo courtesy of Nio.