Trading NIO as It Rips Higher After Deliveries Double

NIO is hitting new all-time highs as it doubled deliveries in October vs. a year earlier.
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NIO  (NIO) - Get Report shares were bursting higher on Monday, up 6% on stronger-than-expected delivery results for October.

The automaker delivered 5,055 vehicles in the month, double what it did in October 2019. The fact that it comes amid an ongoing pandemic makes it all the more impressive.

It’s also impressive given the traction that Tesla  (TSLA) - Get Report has found in China, a formidable competitor that many investors worried would negatively impact demand for NIO's vehicles.

This stock has been a real champion this year, rallying more than 1,500% from the March low to Monday’s high.

On the one hand, it’s got bulls betting on its continued momentum. On the other hand, the rally has skeptics doubting how much further the stock can rally. Let’s look at the charts.

Trading NIO

Daily chart of Nio stock.

Daily chart of Nio stock.

Just over a month ago, on Sept. 30, I wrote about the breakout in NIO. Shares jumped over the $20.50 to $21 area, then consolidated in a surprisingly tight trading range for ten sessions.

That led to another gap higher in mid-October, with shares bursting higher by 22.5% in a single session.

So far, NIO has maintained its pattern. Shares put in some type of bullish consolidation pattern - be it a wedge, ascending triangle, etc. - then power higher to the upside.

Along the way, the 20-day moving average has continued to guide shares higher. The 50-day moving average will likely act as support once it's tested on the downside. The last time it filled in on that role was in May, showing just how the stock has been.

Using retracements and extensions can be a difficult endeavor. In the case of NIO, I measured from the all-time low in March 2020 to the prior all-time high in 2018. That high came on NIO's third trading day after its initial public offering.

That range - $1.19 to $13.80 - is incredibly wide. However, it has been helpful thus far. Currently, shares are running into the 261.8% extension at $34.20.

Bears want to see this level act as resistance and see a dip below $30. Should we get the pullback, bulls want to see prior resistance near $30 hold as support.

Ultimately, bulls are looking for a close above the 261.8% extension, putting the three-times range extension in play near $39.