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NIO Stock Reverses Hard — Can It Trade Like Tesla to New Highs?

NIO stock gapped lower on disappointing October delivery results, but has reversed higher. Can it run into the end of the year?

Nio  (NIO) - Get NIO Inc. Sponsored ADR Class A Report shares are ripping higher on Monday, now up 2.5%. But how can a stock be “ripping” when it’s up just 2.5% on the day?

When the stock opens lower by almost 3.5% on the day and reverses to a near-7% gain from the lows, that should be a solid definition of ripping.

In any regard, the early movement in NIO isn’t from earnings. Instead, it’s from deliveries.

The automaker delivered 3,667 vehicles in October, down almost 28% year-over-year. A restructuring in production lines coupled with supply chain issues drove the decline.

It’s no surprise that shares spilled lower in premarket trading as a result. However, the reversal is impressive.

Lucid Motors  (LCID) - Get Lucid Motors Report and Xpeng  (XPEV) - Get Xpeng Report both moved higher too, while Tesla  (TSLA) - Get Tesla Inc Report shares are booming to new all-time highs

Some are even looking for $1,500 a share

That’s not surprising given the momentum we’ve seen in the group lately, as well as stocks like Ford  (F) - Get Ford Motor Company Report.

Now the question is, can NIO finally get on the bandwagon and rally into year end?

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Trading NIO stock

Daily chart of NIO stock.

Daily chart of NIO stock. 

NIO stock bottomed in May when the bear market in growth stocks came to an end.

Amid the stock’s most recent correction, shares bottomed in early October and gave investors a higher low to work with. So far, the stock is forming a giant wedge, marked by higher lows and lower highs.

The last two weeks of trading were in a relatively narrow range, which looked to be breaking with Monday’s gap down.

However the 20-day and 50-day moving averages combined as support, allowing NIO to rocket higher.

Now back above the 10-day moving average, bulls need to see the stock clear the daily VWAP measure from the July high. If it can clear this mark — which has been stout resistance for months — it puts the 200-day moving average and downtrend resistance in play.

Above all of these measures and $50 is in play, followed by the 61.8% retracement near $53.

On the downside, losing this week’s low would deal a tough blow to the bull case, putting the weekly VWAP measure in play. Below that measure is followed by a possible test of uptrend support and the October lows.

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