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NIO Stock Alert: Trading NIO As It Prepares for U.S. Entry

NIO stock is trying to stage a bullish reversal as it reportedly prepares for the U.S. market. Here's how to trade it from here.

NIO  (NIO) - Get NIO Inc. (China) Report stock has not been trading all that well over the last few months despite strength in other electric vehicle (EV) stocks.

While Tesla  (TSLA) - Get Tesla Inc Report is not exactly hitting new 52-week highs, the stock has been holding up pretty well now that it’s back above $1,000.

That’s true even as CEO Elon Musk has continued to dump billions of dollars worth of the stock.

Ford  (F) - Get Ford Motor Company Report, General Motors  (GM) - Get General Motors Company Report and others have been holding up pretty well too. However, NIO stock is not in the same category.

That’s even as the company reportedly prepares for launch in the U.S. market.

Down about 28% so far this month, NIO stock has been in a world of pain. In fact, just today the stock fell to new 2021 lows and was down about 7% at the session low.

Now down in five of the last six months and bulls are wondering where the bottom is.

Trading NIO Stock

Daily chart of NIO stock.

Down about 60% from its all-time high earlier this year, it’s tough for bulls to acknowledge that this decline has been fair.

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Even despite the pullback, the company still commands a market cap of roughly $50 billion. It would not be hard to argue that even the current valuation is a generous — at least by historical valuations given to the auto industry.

The current chart does not have a great look to it. However, there is a chance we see a reversal from here.

Notice how NIO stock broke below the prior December low of $27.79, dropped to a new low of $27.52 and then reclaimed the prior low ($27.79).

It also did so with some bullish divergence on the RSI reading (blue arrow).

Aggressive bulls can trade this reversal for a short-term day trade against the new low near $27.50 or they can look to swing it for a potentially larger move.

In the latter case, we want to see the stock hold above $27.79, and continue to push higher from here.

Specifically, let’s see how it handles the 10-day moving average and should it get there, the $30 level.

Above $30 and the next three levels are pretty straight-forward: $31.50, the 21-day moving average and the gap-fill at $32.90.

On the downside, a break of $27.92 puts the $27.52 low back in play. Below that and we could see a test of the 10-quarter moving average, which is currently at $25.60 but rising quickly.