Good afternoon young padawans of the markets. I hope everybody is doing well despite the world around us these days. It is time to discuss NIO. The stock soared to ATH after NIO day last Saturday ((I fell like every stock I write about is at ATH. Well, we can worry about that later). NIO has been a beast since late 2019. I am glad I got in early, with an average buy price of $13.5 but I wish I had gotten in earlier when I first noticed it around March/April, at which time it was trading under $3. That's right $3 dollars. Anyway, this one I am keeping for my long term portfolio but like TESLA, I am also taking advantage of the big swings and trading some shares when the opportunity arises.
CUP & HANDLE
It seems like another buying opportunity may be presenting itself in the horizon. It looks like NIO is printing a CUP & HANDLE pattern on the daily chart. As you may know, in general the longer patterns take to form the stronger they are. A C&H on the weekly chart would be stronger than one formed on the daily, and the target would most likely be higher. However, C&H on the daily chart are also very reliable formations.
All that said, the C&H is not confirmed at this point since it can take a few more days to complete the handle portion of it. We may also have a fast downside or upside move outside the handle area, which would most likely invalidate the pattern. It is unlikely but it can happen. Additionally, even if the C&H forms it doesn't need to breakout necessarily although that is the bias. In any case, you should keep this on your watch.
OTHER TECHNICALS
Further downside move is corroborated by:
1. bearish divergence between price and RSI
2. MACD starting to curl down
3. RSI itself moving down (thus forming the divergence)
4. ADX moving up while the price moves down (ADX is a trend indicator--if price is going down and ADX up it means a downtrend may be about to start)
5. -DI curling up while +DI curls down, showing that it may be time to short or close positions (still in its beginning but moving fast)
6. There are two consecutive gaps, a clear result of the euphoria around NIO day. These are breakaway gaps, which more often than not are filled
7. NIO moved away from the emas a little too quickly when compared to previous rallies. That is ok but I believe that when we add all these indicators together it makes sense that NIO would pullback in the short term and catch up with the 14-ema and 21-ema.
8. the first breakaway gap happened right on what was then resistance for four consecutive days recently and five consecutive days in the beginning of the cup formation. It was on that resistance that the price was sent down. Additionally, the 14-ema and 21-ema are moving close to that resistance. It would make sense that that level is now tested as support.
WRAPPING UP
Now these are the strong technicals that provide enough foundation to believe further downside is about to happen but as I always say, it doesn't mean that the price has to go down and the C&H has to form. This is just the bias. Although there is an overall bearish outlook people may still feel this is a good time to buy and the price can start going up again. This has happened a lot lately, specially in the EV ecosystem.
All that said, if this setup plays out I am a buyer around the $55 mark depending on how the price reacts if/when we get there. The textbook way of doing it is to wait a break and close above the top line of the handle but I want to get most of the move so I will buy the $55 support if it holds. If the price continues down I will dollar cost average my way down since I am already in it. If the setup plays out it could take a little while to reach the C&H target, so be patient.
I know that was a lot my dear padawans but I hope you learned something useful for this trade and future trades.
Share the love:
If you get anything out of this TA, please like the chart so it moves up and others can benefit from my work. A simple click on the like button goes a long ways.
Follow for more:
I have an outstanding winning rate (check my other charts). If you want the best entry/exits just follow me, you won't regret. Thanks a lot!
***The ideas shared here are my opinion, not financial advise to place trades. Please do your own research before buying/selling stocks***
CUP & HANDLE
It seems like another buying opportunity may be presenting itself in the horizon. It looks like NIO is printing a CUP & HANDLE pattern on the daily chart. As you may know, in general the longer patterns take to form the stronger they are. A C&H on the weekly chart would be stronger than one formed on the daily, and the target would most likely be higher. However, C&H on the daily chart are also very reliable formations.
All that said, the C&H is not confirmed at this point since it can take a few more days to complete the handle portion of it. We may also have a fast downside or upside move outside the handle area, which would most likely invalidate the pattern. It is unlikely but it can happen. Additionally, even if the C&H forms it doesn't need to breakout necessarily although that is the bias. In any case, you should keep this on your watch.
OTHER TECHNICALS
Further downside move is corroborated by:
1. bearish divergence between price and RSI
2. MACD starting to curl down
3. RSI itself moving down (thus forming the divergence)
4. ADX moving up while the price moves down (ADX is a trend indicator--if price is going down and ADX up it means a downtrend may be about to start)
5. -DI curling up while +DI curls down, showing that it may be time to short or close positions (still in its beginning but moving fast)
6. There are two consecutive gaps, a clear result of the euphoria around NIO day. These are breakaway gaps, which more often than not are filled
7. NIO moved away from the emas a little too quickly when compared to previous rallies. That is ok but I believe that when we add all these indicators together it makes sense that NIO would pullback in the short term and catch up with the 14-ema and 21-ema.
8. the first breakaway gap happened right on what was then resistance for four consecutive days recently and five consecutive days in the beginning of the cup formation. It was on that resistance that the price was sent down. Additionally, the 14-ema and 21-ema are moving close to that resistance. It would make sense that that level is now tested as support.
WRAPPING UP
Now these are the strong technicals that provide enough foundation to believe further downside is about to happen but as I always say, it doesn't mean that the price has to go down and the C&H has to form. This is just the bias. Although there is an overall bearish outlook people may still feel this is a good time to buy and the price can start going up again. This has happened a lot lately, specially in the EV ecosystem.
All that said, if this setup plays out I am a buyer around the $55 mark depending on how the price reacts if/when we get there. The textbook way of doing it is to wait a break and close above the top line of the handle but I want to get most of the move so I will buy the $55 support if it holds. If the price continues down I will dollar cost average my way down since I am already in it. If the setup plays out it could take a little while to reach the C&H target, so be patient.
I know that was a lot my dear padawans but I hope you learned something useful for this trade and future trades.
Share the love:
If you get anything out of this TA, please like the chart so it moves up and others can benefit from my work. A simple click on the like button goes a long ways.
Follow for more:
I have an outstanding winning rate (check my other charts). If you want the best entry/exits just follow me, you won't regret. Thanks a lot!
***The ideas shared here are my opinion, not financial advise to place trades. Please do your own research before buying/selling stocks***
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Still within the handle:
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Scaling in from this level:
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The handle is coming together very nicely so far. I am buying on the handle support and below.
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Cup and Handle playing by the book so far:
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$NIO cup and handle textbook worthy
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Looks like $NIO is breaking out of the cup and handle!
