As the world comes out of the pandemic, governments are spending fortunes trying to stimulate their economies. Nobody’s doing more than the United States and China. The tailwinds are huge for stocks, including popular electric vehicle (EV) companies. Only a few EV stocks actually have current fundamentals that are worth chasing. Nio (NYSE:NIO) stock is one and it has been an excellent trading vehicle.
The White House unveiled its strongest debt to GDP since after World War II. It appears that we are still in crisis mode. This makes investment on Wall Street a bit trickier than normal.
The long-term thesis for EVs is real because the whole world is behind it. We don’t yet know if it will be the sole replacement for the internal combustion engine (ICE). Gut says that it will a hybrid model of sorts in the end. Electricity generation still depends largely on fossil fuels.
But for now I can trade the financial opportunity behind EV companies.
Nio already has a fast-growing profit-and-loss statement. It also has the advantage of operating in the largest market in the world. They also have the benefit of the Chinese government helping them along the way. In addition, they have a unique approach to handling battery swaps.
These facts make it an interesting opportunity for growth investment.
Buy the Dips in NIO Stock
Fundamentally it makes sense to invest in Nio stock – especially on bad days. The methods on Wall Street are changing quickly. Case in point: what’s going on in Reddit rooms still. The old concepts of investing are now stale. I remember day when investors aimed to emulate Warren Buffet and own a stock for the really long term. I think there are hundreds of opportunities in between that don’t conflict with investing for the long term.
I’ve written about such swing trades for NIO stock a handful of times in past 12 months. Each has delivered more than 25% yield in just days. The concept does not require high-level technical skills, only basic understanding of charts. Just since February, buyers who entered it on dips into the low 30s had great returns quickly. The resistance levels going into $45 per share have served as excellent exit points. It is approaching those levels now, so caution starting new longs in size.
This is not an either-other situation. Investors can invest and trade a stock around a core position. I can hold one tranche long term and trade shorter-term price action with the balance. There isn’t one perfect way to trade that fits everyone, everywhere. We now have so many new tools that empower us to be our own experts.
Trust in the Facts and Keep Emotions in Check
Investors should just use facts and then form opinions. More often than not mistakes happen when people act on emotions. The FOMO effect pushes use into chasing too late or getting out at the wrong time. To neutralize that risk, we must think like machines.
Statistics show that the 80% of trading happens because of machines trading, not humans. This is a good thing because machines follow mathematical rules, which makes them predictable. Whether we like it or not, the technical analysis on a chart is a self-fulfilling prophecy to a degree. Nothing is foolproof but having a map in hand sure beats trying to wing it based on gut.
This only requires very little effort once for long-term use. Nio stock and simple technical analysis would equal to many more trading opportunities. In the end, if the stock market is higher in the future then so is Nio. Among the EV stocks, Tesla (NASDAQ:TSLA), Nio and XPeng (NYSE:XPEV) are my only three choices. The rest are lacking the facts that I need in order to form a conviction opinion.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Nicolas Chahine is the managing director of SellSpreads.com.