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NIO Is Still Weakening, So Be Prepared to Act

NIO is showing weakness in the charts, so get ready to sell or have a sell stop in place.
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On Feb. 9, 2021, we told investors that the charts of EV maker NIO Inc. (NIO) were weakening, saying "NIO's charts and indicators make me nervous. Longs should raise stop protection to $53. I want to get out of the way if a deep pullback develops." Prices have not declined to our stop at $53, but the indicators are pointed in that direction.

In this updated daily bar chart of NIO, below, we can see that prices have edged lower in recent days. NIO is close to a test of its late January/early February lows, as well as the rising 50-day moving average line. The daily On-Balance-Volume (OBV) line shows weakness since early January, telling us that traders have shifted to more-aggressive selling from a pattern of more-aggressive buying. The Moving Average Convergence Divergence (MACD) oscillator continues to edge closer to the zero line.  

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In this weekly Japanese candlestick chart of NIO, below, we continue to see signs of impending weakness, with a bearish engulfing pattern last month. I would consider prices extended or overbought when compared to the level of the 40-week moving average line. The weekly OBV line has been stalled since the middle of November and the MACD oscillator is ready to cross to the downside for a take-profit sell signal.  

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In this daily Point and Figure chart of NIO, below, we can see a potential downside price target in the $49 area. 

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Bottom line strategy: Continue to be prepared for lower prices either by selling here or on a close sell stop -- the Point and Figure chart suggests $49, but a decline to the bottom end of support around $40 could also happen.

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