By Bret Kenwell, TheStreet.com [1]
The ride in NIO (NIO) has been anything but smooth lately.
While the electric vehicle maker is up big over the past year and up massively from its low in the fourth quarter of 2019, bulls have been struggling lately.
At its recent low earlier this month, shares were down more than 50% from the high set in January.
Tesla (TSLA) has also been struggling. Like NIO, Tesla set its all-time high mark in January too, although shares fell "just" 40% at the low earlier this month.
These stocks are ripe for a bull-bear debate and almost always have been, although the recent decline has brought out some of the more bullish arguments.
Amid the weakness in EV stocks, General Motors (GM) and Ford (F) have been the relative strength leaders in the automotive space. Although they too have been pulling back in recent trading.
Is the current dip an opportunity in NIO?
Trading NIO
Daily chart of NIO stock
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Chart courtesy of TrendSpider.com
When NIO started to crack earlier this month, I was cautious on the stock if it couldn't hold support. It didn't hold and we ultimately saw a dip down to ~$32 before getting a powerful bounce.
Ultimately though, NIO couldn't reclaim its short-term moving averages. It never even tried to reclaim the 100-day moving average, which failed as support earlier in the month.
With Thursday's reversal, bulls have several key levels to keep an eye on.
Bouncing hard off the 10-month moving average, NIO bulls have a low to measure against in the short-term. On the upside, let's see if shares can reclaim the $40 level. Above puts a key test in play with its 10-day and 21-day moving averages.
Should shares lose Thursday's low at $35.12, then the 200-day moving average is on the table, as is the March low at $31.91.
If the selloff situation plays out, be on the lookout for a break of $31.191 but not a close below it, indicating a potential "look below and fail" – a bullish development that requires some upside follow-through.
Here's the bottom line: Keep an eye on $40 and Thursday's low. These two levels are the gateway to higher or lower prices, respectively.
From TheStreet.com [1]