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Can NIO Stock Really Rally 66% to $56 a Share?

NIO stock is rallying on Thursday after a very nice upgrade from Goldman Sachs. Let's look at the charts.

Stocks burst higher at the open and have continued to grind upward on Thursday. In that respect, perhaps NIO  (NIO) - Get NIO Inc. Sponsored ADR Class A Report would have had a great day regardless of analyst discussions.

However, shares are up about 7% on the day, largely thanks to an upgrade to ‘buy’ at Goldman Sachs.

The analysts assigned a $56 price target, which represents an almost 66.5% upside to Wednesday’s closing price.

In recent weeks, Tesla  (TSLA) - Get Tesla Inc Report gave bulls a great breakout that continues to build steam, while General Motors  (GM) - Get General Motors Company (GM) Report and Ford  (F) - Get Ford Motor Company Report have also been trading really well.

A notable missing stock from that group has been NIO. Will Thursday’s move be enough to get the stock back into the game, even though it’s still down 46% from its high in early January?

On Wednesday, NIO made multi-month lows. With Goldman’s price target though, the analysts are calling for NIO to make multi-month highs.

Can it regain the necessary momentum to do so?

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Daily chart of Nio stock.

Daily chart of Nio stock.

On Sept. 1, I wrote that NIO’s charts suggested some caution, as we questioned whether it would have a fifth and (hopefully final) leg lower.

The stock topped out two days later — the “D” wave of the correction as shown on the chart — and trickled lower by more than 20% to this week’s low.

Is that the end of the correction? Bulls sure are hoping so.

From here, I really want to see NIO stock clear the $36.25 area. Not only would that put the stock over the 21-day moving average, which has been active resistance, but it would also allow the stock to reclaim the weekly VWAP measure.

If it can do that, it could quickly put the 50-day moving average in play, followed by the gap-fill level at $40.59, then the 200-day moving average.

Over the 200-day and $50 could eventually be in play.

So can NIO stock get to $56? Of course it can but that doesn’t mean the road will be easy.

At this point, I want to see NIO hold $35. Below $35 puts the gap-fill in play, followed by this month’s low. 

Thursday’s action is impressive, but NIO still has plenty of hurdles to clear before the stock is out of the woods.