Nio Inc (NIO)

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Nio Charts Suggest Caution After Disappointing Deliveries
By: TheStreet | September 2, 2021

• Nio stock is trading lower after the Chinese EV producer issued a disappointing update on deliveries. Here's how to trade the stock from here.

It didn’t look like it was going to be a very good day for Nio (NIO) on Wednesday.

The shares were trading lower by 5% in the premarket, as investors were disappointed by the Chinese electric-vehicle producer's delivery update.

Nio reduced its third-quarter delivery expectations and now expects to deliver 22,500 to 23,500 vehicles in the quarter. That’s down from the prior range of 23,000 to 25,000 vehicles.

That said, Nio stock is now flat on the day after an impressive rebound.

It also comes at a time where other EV stocks -- except for Tesla (TSLA) are struggling. Tesla is hitting its highest level since April.

Despite Nio trading below all of its daily moving averages, this rally from negative territory on bad news is pretty impressive. Let’s look at the chart to see what could be next.

Trading Nio Stock


Daily chart of Nio stock.

Chart courtesy of TrendSpider.com

Nio rode into 2021 with some impressive momentum. Unlike most growth stocks, though, this name topped well before the February high. That doesn’t mean, though, that it was spared from the ensuing bear market in growth stocks.

Nio was knocked lower just like its peers. In early May, the stock took out its February low, bottomed at $30.71 and quickly rebounded higher. Since being rejected near the $54 level and the 61.8% retracement, Nio stock has been struggling for upside traction.

Today’s action is impressive -- yet I am still a bit cautious on Nio stock.

The shares remain below the key $39 to $40 area, as the July low is currently acting as resistance. Before the struggle with this area, it looked like we had a rather typical “ABC” correction down to the weekly VWAP measure.

Now with Nio struggling, though, it sets us up for a potentially larger pullback — something like an “ABCDE” correction, a five-wave dip.

Aggressive bulls may consider being long with a stop below the August low (at $36.24). But I’d rather have a better entry.

That either comes from a deeper correction -- potentially to the weekly VWAP measure or possibly even deeper -- or on a rotation higher.

For the latter, a close above $40 and the 21-day moving average would be attractive. Not only would that give us a weekly-up rotation but it would also put the 50-week and 200-day moving averages in play.

Nio is a tricky one. Its chart still suggests caution, but Tuesday’s action had some promise. Let’s keep an eye on this one.

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