On January 22th, I published an article for EV about the technical support and resistance levels for Nio stock in a short-term view. At the time, Nio‘s share price was at $27.23 and the stock was holding the $24.95 support — an important level to avoid new 52-week-lows and the last one before the gap between $21 and $23.50. Meanwhile, Market saw a tough week and Nio hit a new 52-week-low today at $19.31.
With the pressure from the Fed Meetings and the expected Rates rising plus the Russia/ Ukraine tension and the recent US Inflation data being the most relevant contributors for the actual panorama.
“On the bearish view, there’s also a gap that could be filled between $21 and $23.50, which I consider only an hypothetical chance as long as the share price remains higher than the $24.95 key point.”
January 15th, 2022 | Article by C. Afonso
FILLING THE GAP
Gaps are areas on a stock chart where the price of a stock moves sharply up or down, with little or no trading in between. As a result, the asset’s chart shows a gap in the normal price pattern. Nio had a gap in October 2020, when the share price was in a bull market and achieving new all-time-high values almost every week. That quickly escalate, created this gap but the share price rose above $30, $40 and even $60 without a pullback to fill it.
To fill a gap, share price has to move back to the original pre-gap level. It is also relevant to say that once a stock has started to fill the gap, it will rarely stop until its bottom, because there is often no immediate support or resistance. Nio’s gap, from October 2020, was between $21.60 and $23.75. The share price hit its bottom yesterday, when it was trading around $21.60.
50 & 200 Day Moving Average
The 50 and the 200 day Moving Average (MA) is a long-term indicator that traders and short-term investors use to identify and trade with the long-term trend. Nio’s share price has been trading below the 200-days MA since November 30th. During the last 3 months, the share price broke a couple times the 50 days MA (short-term one, represented through the light-blue line) but not the long-term MA (repesented through the darker-blue line). As indicated on the chart below, it was rejected four times since the share price was above $40. The rejection of the MAs is seen an indicator that lower levels may be seen in the following weeks.
As a general guideline, if the stock price is above a moving average, the trend is up and if the price is below a moving average, the trend is down. However, moving averages can have different lengths which means that one MA may indicate an uptrend while another MA indicates a downtrend.
Currently, Nio‘s Daily 50-days MA is at $31.95 and the 200MA at $38.28. That said, Nio investors may be looking at these two levels during the upcoming weeks to invert the short-term down trend now that the gap has been already filled.
The next key-levels following the Moving Averages (5, 20, 50, 100 and 200 days) are: $22.70 – $28.27 – $31.95 – $35.09 and $38.28.
DEATH CROSS
The death cross is a technical chart pattern indicating the potential for a major sell-off and it happens when the 50 days moving average (Lighter-blue line) crosses 200 days moving Average (Darker-blue line) — which means, when a stock’s short-term moving average crosses below its long-term moving average. The Golden Cross patern indicates the inverse.
Through the hourly chart, we can see that the stock had a death cross last November, 61 days ago. Since then, share price dropped more than 50%, from $40.25 to $20.21, as of 02:36 PM EST.
Another interesting fact to note is that, according to SEC documents, Originalwish Limited, the company founded by Nio’s CEO, bought yesterday another 3 Million shares ($68 Million) having now a total of 177,467,776 shares. Which means that Nio’s CEO, William Li, that is obviously up to date — more than no one — with the company growth and has access to the orders numbers of the ET7 and the ET5 model, for example, decided to add another 3 Million shares through Originalwish LTD. The company increases its ownership of Nio up tp 10.40%.
Check SEC’s filling here:
https://www.sec.gov/Archives/edgar/data/1736541/000110465922007974/tm223218d1_sc13ga.htm