Nio Stock Is Breaking Out – Here’s How the Chart Looks Now

Nio (NYSE:NIO) stock continues to trade incredibly well. The electric vehicle (EV) maker has the “it” factor right now, and its stock is reflecting that. The EV space has been a bit mixed this year, but that has not been the case for Nio. 

Nio Stock May Actually Be Worth the Gamble This Time
Source: xiaorui /

The Chinese automaker has pulled the correct levers to get investors excited.  After Tesla’s (NASDAQ:TSLA)explosive move higher, they could taste the potential of Nio. 

That said, there have been some hiccups in the EV space. Workhorse (NASDAQ:WKHS) — which went public using the now-popular SPAC method — has had quite a bit of volatility. The narrative around Nikola (NASDAQ:NKLA) has been a total mess lately, with short reports catching a lot of investors off guard

But Tesla and Nio are different. Their businesses and stock prices have momentum. While Tesla’s shares have been wavering a bit over the last few months, keep in mind that its market capitalization had climbed to $475 billion at one point. 

Enough about the industry, though. What makes Nio special? 

Trading Nio Stock

Daily chart of Nio stock
Click to Enlarge
Source: Chart courtesy of

Have a look at Nio’s daily chart above, which highlights just how strong and orderly the rally has been. Shares erupted off the March and April lows, tripling in June when it set new highs. 

As if that weren’t enough, Nio then blasted through $10, going from $8 to $16 in just a few trading sessions. The shares have undergone a series of consolidations and breakouts since. The latest breakout came on Wednesday, Oct. 14. 

Nio continued to trade around the 161.8% extension (for the entire initial range dating back to its IPO in 2018). Nio was also struggling with the $22.50 area. However, it was clear that the buyers were in control, simply biding their time until the next push higher. 

How do we know that? Look at how tight the range was over the last few trading sessions. Not only did the daily ranges get tighter, but the lows were getting higher as the 10-day moving average continued to nudge Nio upwards. 

With the breakout in play, bulls will likely be targeting $25 on the upside, followed by the two-times range extension at $26.41. If the stock moves above that, $30 could be on the table. On the downside, the $21.50 to $22.50 level needs to hold as support for the bullish move to remain intact. A close below these marks could create more selling pressure. 

Valuing Nio

So why exactly are buyers flocking to Nio? The answer is actually quite simple: because it is growing

There are many companies that have been negatively impacted by the novel coronavirus. There is a large group of companies that can only wish they had positive growth this year, let alone breakeven operations. 

With a narrowing list of publicly traded companies that are still expanding, growth-oriented investors are forced to choose from a smaller number of holdings. Those with accelerating growth — like Nio — are in an even smaller category. 

Breaking down stocks like this creates a funnel look, with fewer and fewer stocks remaining as we approach the nozzle. Those stocks command higher premiums, as there is more demand for them. It helps when a stock’s technicals are favorable, as shown above in this case. 

The stock was upgraded on Oct. 14 by JPMorgan, which gave it a $40 price target. That’s about 66% above its current level. The high target shows how investors are thinking about this name right now. 

Analysts, on average, expect Nio’s revenue to climb this year by 97%, followed by 75% growth in fiscal 2021. Nio still reports bottom-line losses, but those losses are expected to be cut in half this year. In 2021, analysts’ mean estimates call for another improvement, although the company is still not expected to be profitable. 

In the third quarter, Nio delivered more than 12,200 cars, up 154.3% year-over-year. Combined with its revenue growth, this is the type of momentum that growth investors are looking for. 

Lastly, at the beginning of the column, I mentioned that the company is pulling the right levers. For Nio, that meant shoring up its balance sheet. After receiving investments from outside parties, the company’s financial situation has greatly improved. That doesn’t include the secondary offering that the company just completed. 

Coming into 2020, Nio had total and current assets of 14.6 billion Chinese yuan and 4.9 billion yuan, respectively, while its  cash and equivalents stood at just 974 million yuan. Fast forward to the end of June and Nio has 23.1 billion yuan of total assets, 15.1 billion yuan of current assets and more than 10 billion yuan of cash and equivalents. 

On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.


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