• Nio (NIO) leads broad-based rally following positive analyst call and abated delisting fears
• Product catalysts, strong deliveries despite headwinds and NIO stock chart
• Buy NIO stock with a targeted $35 – $40 inside four to six months

It was a strong day for Wall Street against a backdrop of European Union (EU) sanctions targeting Russia, as well as easing inflation and economic concerns tied to Ukraine and Covid-19. But for Chinese electric vehicle (EV) play Nio (NYSE:NIO) stock, an outsized gain of 8.76% on Monday, and a couple key drivers kept NIO stock buyers wanting more.

In a premarket research note, UBS analyst Paul Gong raised shares of NIO stock on Monday to “buy” from “neutral.” Improving brand recognition and sales accelerating in 2022 on the back of three new model launches which offer Nio’s next-gen NT2.0 platform were cited.

The upgrade did find the analyst trimming his price target from $42 to $32. But even after Monday’s burly gain, the forecast still reflects a 34% premium over NIO stock’s market price of $23.85.

NIO also benefited from reports over the weekend that a move by Chinese regulators may finally pave the way for U.S. regulators to audit U.S.-listed American Depository Receipts (ADR) and removing the specter of further China-based delisting’s from U.S. exchanges.

While Monday’s latest obviously pleased Nio shareholders, a further check under the hood at recent developments, should find tomorrow’s NIO stock buyers with continued outsized gains of their own in the coming quarters.

NIO

Nio

$23.24

NIO Is Already Delivering the Goods

While Chinese officials appear to be conceding to the Securities Exchange Commission, NIO has been a certain case of undeserved collateral damage in the Superpowers’ game of political saber rattling.

The lengthy and sometimes hostile back-and-forth between the two country’s played a significant role in the stock’s larger bear market which shed as much as 80% off NIO over fourteen months.

But and unlike many of its ADR peers, Nio has already gone through two years of listing requirements with U.S. regulators without fault.

NIO stock has also been firing on all cylinders with its EV business despite rising Covid-19 cases in China and an increased threat of production and delivery disruptions.

The latest proof of Nio’s wherewithal was announced Friday as March sales data revealed a month-over-month increase of nearly 63% as the outfit delivered 9,985 vehicles.

Data for the three month period also offered a delivery record for Nio as 25,768 vehicles hit the road, marking a year-over-year gains of 28.5%.

NIO Stock’s Price Chart Is Also Delivering

Source: Charts by TradingView

Aside from Nio smartly delivering its EVs and keeping a clean sheet with U.S. authorities, NIO stock’s monthly price chart has put together a convincing bear market bottom.

With Monday’s bid shares sitting at levels confirming a March hammer candlestick and indicating a larger bullish reversal now in play. How big?

Coupled with support from NIO stock’s lower Bollinger band, the 76% retracement level tied to Covid-19, testing of a larger cup breakout from 2020, completion of a Fibonacci-based two-step pattern and oversold buy signal in stochastics—there’s plenty of technical evidence favoring a larger bullish cycle.

Based on where potential overhead resistance from the 50% retracement level and downtrend line reside, I’d estimate NIO stock could rally to $35 and perhaps as high as $40 a share and well above UBS’ target of $32 for shares.

Ultimately, I’d expect resistance to eventually be worked through. But for now and given what’s occurring broadly and bullishly in the market, as well as to NIO stock specifically, a challenge of this key area could easily happen inside the next couple quarters.

Positioning in NIO Stock

There’s every reason to believe Nio shares have bottomed and are just now entering a bullish phase with plenty of upside. Warnings of what might go wrong will as assuredly continue to exist in lockstep with a rally.

Of course, there are no guarantees in NIO stock. A bullish forecast is just that. It’s not a certificate of deposit (CD). But don’t believe the naysayers. Moreover, if investors are wanting a solid growth story that’s been thrown out with the bathwater and are interested in exposure to the EV market, NIO stock is a strong-looking opportunity.

For positioning and given Nio’s fairly solid fundamentals as well as significant price volatility, an actively-managed collar strategy to hedge NIO stock, while also providing the ability to trade adverse stock cycles and come out ahead, it is an appealing strategy.

One slightly unorthodox combination that fits in nicely with our projected upside target, while avoiding a crash test dummy situation if shares crashed to new lows is the NIO May $25/$30 collar.

On the date of publication, Chris Tyler does not hold (either directly or indirectly) any securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.