Nio, Inc (NYSE:NIO) was spiking up almost 5% higher on Monday after a bullish day on Friday caused the stock to rally 4.89%.
The China-based EV-manufacturer on Monday said it rolled out 10,052 vehicles for the month of July, which represents an increase of 26.7% year-over-year. The company also said it expects its vehicle deliveries to accelerate over the coming months as supply chain constraints continue to ease.
The bullish move north had the stock moving up toward a descending trendline, which has been holding Nio down since July 1, 2021. A descending trendline acts as a resistance level and indicates there are more sellers than buyers, as the price continues to fall.
In order for a trendline to be considered valid, the stock or crypto must touch the line on at least three occasions. After that, the more times the trendline is touched the weaker it becomes.
- Bullish traders can watch for a stock or crypto to break up from the descending trendline and, if the break happens on high volume, can indicate the downtrend is over and a rally may be on the horizon. It's possible the stock or crypto may fall down to back-test the descending trendline as support before heading higher again.
- For bearish traders, “the trend is your friend” (until it’s not) and a touch and rejection of the descending trendline can offer a good short entry. A bearish trader would stop out of this type of trade if the stock or crypto broke above the trendline.
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The Nio Chart: Over the past 13 months, Nio has attempted to break up from the trendline on numerous occasions, but has failed each time. Since June 24, Nio has been trading just below the trendline and has tested the area as resistance four times since that date. Each time the stock tests the area, it weakens, making it more likely Nio will break up from the trendline in the near-term.
- Nio is trading in a downtrend under the trendline, with the most recent lower high printed at the $21.17 level on July 21 and the most recent lower low formed at the $18.59 level on July 28. On Monday, Nio came close to creating a high above the most recent lower high, but rejected. If bulls come in later on Monday or on Tuesday to push Nio up above the $21.20 level, the downtrend will be negated.
- Nio has a gap above between $26.41 and $27.22. Gaps on charts fill about 90% of the time, which makes it likely the stock will rise up to fill the empty trading range in the future. If Nio were to close the gap, it would represent a 32% increase from the current share price.
- Nio has resistance above at $21.77 and $23.98 and support below at $20.25 and $16.75.
See Also: How to Read Candlestick Charts for Beginners
Photo: Courtesy of nio.com
