Nio Makes A U-Turn And Heads Up North: Will The Stock Remain On Track?

Nio, Inc NIO gapped up about 4% higher Thursday morning after Goldman Sachs upgraded the stock from Neutral to Buy with a price target of $56. China-based stocks, in general, were also boosted by a positive comment regarding a recent meeting between U.S. and China officials.

Nio’s stock has suffered from a steep downtrend since reaching a July 1 high of $55.13. That may be set to change, however, because this week Nio has created a bullish pattern on the daily chart.

See Also: 3 Catalysts That May Be Driving Tesla, Nio, XPeng, Li Auto Higher Thursday

The Nio Chart: On Monday Nio fell through a support level near the $34 mark but didn’t get any bearish follow-through on the move and bottomed out at $33.28. The stock backtested the level again on Tuesday and Wednesday and held above it, which created a bullish triple bottom pattern.

On Thursday, Nio popped back up over the $34 resistance, fell slightly lower when profit takers came in and then bulls bought the dip and the stock began heading toward a higher resistance level at $36.56. Nio opened the trading day above Wednesday’s high, which created a lower gap on the chart.

Nio also has a gap above between $39.52 and $40.53. Gaps fill 90% of the time so it's likely Nio will trade up into the range in the future.

If Nio can break up above the Oct. 1 high of $36.67, it will create a higher high on the daily chart, which will indicate the downtrend is broken. Bulls will then want to watch for a higher low on the daily chart for confirmation of a trend change.

Nio is trading above the eight-day exponential moving average (EMA) but below the 21-day EMA. If Nio’s stock can then regain the $36.50 level as support and stay above it for a period of time the eight-day EMA will cross above the 21-day, which would be bullish. The stock is trading well below the 200-day simple moving average, however, which indicates the stock has a lot of work to do before overall sentiment turns bullish.

• Bulls want to see big bullish volume come in and drive the stock up over the higher resistance level, which will put the stock above the 21-day EMA. Above the $36.50 level, there is another resistance zone at $39.61.
• Bears want to see big bearish volume come in and drop Nio back below the $24.06 support level and for bearish momentum to force the stock to make a lower low below $33.28, which would confirm the downtrend is intact. Below the level, Nio has support at $30.71.