China Stimulus & Technical Analysis Says To Buy Nio Inc (NIO)
By Thu, Jun 27, 2019
Most of the investing public is running scared from shares of China electric car maker Nio Inc (NIO). However, after falling from a 52 week high of $13.80 to its current $2.58, investors may want to take a second speculative look, and I will tell you exactly why.
China stimulus is getting into the system and more is coming. In fact, China will be forced to compete with lower interest rates and additional stimulus from the European Central Bank, Federal Reserve and Bank of Japan. The government looks at electric cars as essential for the future power of China by eliminating smog in the major cities. Car makes like NIO will see additional help and support from the Chinese government. While deliveries have fallen lately, that is likely within a month or two of changing as the stimulus kicks in.
The trade deal, while it may go on for a little longer, will end. The end date will likely be prior to the 2020 elections. At 52 week lows, any hint of a cease fire or agreement between the United States and China will send shorts running. President Trump needs a win going into the election, and a deal with China that stimulates the economy might be the one thing that could help him win (and he knows it).
On a technical trading/investing analysis basis, NIO Inc has already made a pivot low on June 14th at $2.35. After that low, the stock ran over $3.00 and is currently in a classic bull retrace. In addition, technical analysis metrics like the RSI and MACD are showing positive divergences, signaling further upside is likely. The stock is still oversold on a monthly and weekly basis, further signaling there is still upside to go. I have a technical price target in the next couple months of $4.35. That is a potential upside move of 70%. Hedge funds continue to hold large positions with a long term view. In the last two weeks, sellers have started to fade with volume becoming lighter while large block buyers have increased
Please note, this is a speculative call on a small/mid-cap stock. Any position should be small and part of a diversified portfolio. Note the chart below to view the stock performance.
About the Author
Chief Market Strategist Gareth Soloway has been an avid swing and day trader since his days at Binghamton University where he studied Economics. After college, Gareth quickly excelled as a financial adviser but his heart was always in swing and day trading. He had this long standing belief that he could help investors make more money by advising them on shorter term investments (holding a stock for days to weeks) than the buy and hold crowd who lost 50% of their money during every market collapse. “Why not profit during the bear markets just like the bull markets”, he said. While helping others gain financial independence during the day, he spent his nights studying charts and price action, developing a unique market trading system that put his profits on a rocket ship. Some nights he would barely sleep when he found a new technique that was proven, once back-tested.
