Nio stock surged to its best trading day since July, forcing the price to break free from the grips of an oppressive triangle pattern. For almost three months, the electric carmaker has been stuck in reverse. Following the spike to $55 on the 2nd of July, Nio (NYSE: NIO) has been trending lower. By yesterday, the price had dropped 38% to $34.42. However, by the close of play, NIO was in the green, finishing the day higher by $1.39 (3.93%) at $36.77.
The Chinese governments’ crackdown on various economic sectors has seen US-based investors pull back from China-centric stocks. Nio, which partners with a state-owned company, is one of many US-listed Chinese companies to fall out of favour recently. However, yesterday, investors were given a glimmer of hope when the EV maker revealed plans to launch its ET7 luxury sedan in Germany in 2022. As a result, NIO has hurdled the resistance of a descending trend line which could trigger momentum buying and push the price towards $40.
The daily chart highlights a descending triangle that has dictated the price action since June. The top edge of the triangle in place from the July high was pierced yesterday as the price broke above $36.20. If Nio stock trades higher today, it will confirm the breakout and potentially extend to the 50 DMA at $40.28.
However, this bullish thesis is based purely on the price action. On that basis, if NIO closes below the trend line at $36.20, the view becomes invalid. Furthermore, if the stock breaches the lower edge of the triangle at $34.60, the bullish technical outlook flips to bearish.
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