NIO Stock Is Idling Nicely for Investors

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EV play Nio (NYSE:NIO) raced it’s way to a dazzling podium finish in 2020. But does one of last year’s champions have the wherewithal to drive NIO stock investors to another victory lap? Let’s look at what’s happening today both off and on the price chart, then offer a risk-adjusted determination aligned with those findings.

Source: Andy Feng / Shutterstock.com

It’s been a quiet couple weeks for shares of Shanghai-based Nio. And maybe for good reason too. Amid 2020’s Tesla (NASDAQ:TSLA) halo effect, quickly improving EV technology, deafening drumbeat for going green and Nio’s top-notch execution, shares did surge by nearly 1,200% toward $90 billion, while leaving bankruptcy fears determinedly in the rearview mirror.

As well, while Nio shares have been mostly under wraps in recent days, 2021 is nevertheless also off to a strong start.

Out-the-gate in January Nio stock charged higher by almost 37% to record levels in just a handful of sessions. The reaction appears credible too on the back of record monthly deliveries news for December and a bullish “Nio Day” that promises continued robust growth for the automaker.

This year’s annual event revealed NIO’s sleek, ET7 electric vehicle. The company’s first-ever luxury sedan will roll out next year and promises an industry-best driving range of 621 miles and what’s been called a “second living room concept.”

The Delivery Catalyst

Now and after idling with gains of around 16%, freshly-charged NIO stock has new catalysts to potentially catch Wall Street’s interest yet again. Overnight Nio released its latest monthly deliveries data for January. And on paper, the report didn’t disappoint. For the month, the EV outfit delivered 7,225 vehicles representing a more than four-fold increase over 2020’s deliverables of 1,598 cars. The deliveries also established Nio’s sixth-straight month of record-breaking results.

To be sure, Nio is no Tesla. CNBC notes the company’s cumulative deliveries of nearly 83,000 have taken the automaker nearly six years to achieve. At the same time, Tesla delivered 180,570 vehicles in 2020’s fourth quarter.

Still, while Nio may not prove to be Tesla’s heir apparent, with the EV outfit agreeably firing on all cylinders the staying power for another solid-looking podium finish appears increasingly likely.

NIO Stock Weekly Price Chart

Source: Charts by TradingView

Technically, all stocks correct. Even the best of the best. TSLA investors felt that kind of impact firsthand this past fall prior to a scorching rally to record highs. Today and somewhat less frustratingly, Tesla shares are bobbing and weaving in a four-week flattish basing pattern of 12% after staging a false breakout last week. And NIO stock is no different.

Similarly, shares of NIO put together their own larger bullish cup-shaped correction in late 2020 resulting in a breakout by early January. Now and after hitting its post Nio Day all-time-high of $66.99, the stock pulled back into a slightly less challenging congestion pattern of around 17% in depth.

With today’s price action testing the former cup’s high for support and weekly stochastics teasing a potential bullishly divergent crossover, a fresh buying opportunity looks close at hand.

Bottom Line

Bottom line and for now, I’d suggest watching stochastics to generate a signal before entering. That should also happen alongside price action still supporting NIO stock’s intact bullish trend, rather than the end of the road. Should those conditions be met, which we’re optimistic they will, a collar strategy, rather than a standalone stock position, is a favored vehicle for investors looking to make Nio a core holding in their portfolio.

On the date of publication, Chris Tyler held, directly or indirectly, positions in Nio (NIO) and their derivatives, but no other securities mentioned in this article.

Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100%  the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.