Trading Nio and Li Auto After Strong Start to 2021

Nio, Li Auto, Tesla and others are off to a strong start in 2021. Let's look at the charts to see what type of upside could be in the cards for the EV makers.
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It’s a tough day in the markets, but not a tough day in the world of electric vehicles.

Man, that has to be driving the bears crazy. There’s simply no way the fundamentals justify some of these valuations. At the very least, that’s their thesis anyway.

While Nio  (NIO) - Get Report, Tesla  (TSLA) - Get Report and others have sky-high valuations, that hasn’t seemed to stop the stocks from charging high. In fact, Tesla hit a new all-time high on Monday while clearing the $700 billion market cap threshold.

Nio was up more than 10% at one point on the day, while Li Auto  (LI) - Get Report and XPeng  (XPEV) - Get Report were also up notably on the day as well. The group was rallying on strong delivery results

It doesn’t make any sense to short-sellers, but the reality is this: It’s hard to get bearish on a stock when it’s in a steep uptrend.

That’s not the case for all of the EV stocks, but is the reality for others. Let’s look at a few of them now.

Trading Nio

Daily chart of Nio stock.

Daily chart of Nio stock.

Some may be wondering why Tesla isn’t on the list, but it’s because we just looked at that name last week. With Nio, this one has been every bit as impressive as Tesla.

Last Thursday, Nio stock closed over downtrend resistance and added to those gains on Friday — the last trading day of 2020. However, shares were rejected by the December high and the 61.8% retracement.

With Monday’s rally though, shares are clearing both measures. Now I want to see last month’s high at $52.10 and the 61.8% retracement near $50 hold as support.

Below will likely put the 50-day and 10-week moving averages back in play. On the upside, let’s see if Nio can challenge its all-time high at $57.20. Above puts $60-plus on the table.

Trading Li Auto

Daily chart of Li Auto stock.

Daily chart of Li Auto stock.

I’m only going to chart Li Auto and not XPeng because the two look nearly identical in regards to the current pattern.

Li has less strength than Nio and that should be noted even while both stocks still trade well.

After temporarily failing, the 10-week and 50-day moving averages are acting as support as Li tries to rallies. It reclaimed the key $30 level as well, while it works higher over its short-term moving averages.

What bulls need to see now is for Li Auto to hold up over this area, preferably staying north of $30.

Below that and the key moving averages opens it back up to a retest of the 38.2% retracement and the December low at $26.52.

On the upside, there’s a bit less conviction. However, a rotation over $33.70 is bullish and could put the December high in play up at $39.35. Above that and a move over $40.80 may be possible.