Nio Inc. (NIO) is a Chinese automobile manufacturer that designs and develops electric vehicles. Its share price went up Wednesday on very heavy trading volume based on the belief that China might start easing its zero-Covid policies. Sometimes heavy trading volume is a sign of conviction, but it must be considered in the context of trends and other considerations.
Let's check the charts.
In this daily bar chart of NIO, below, we can see a downward trend stretching back over the past year. Prices have been steady around $10 for the past four weeks or so, but I would never declare this to be an impressive base pattern. Trading volume did increase around the October/November lows, but the On-Balance-Volume (OBV) has not turned clearly higher. The Moving Average Convergence Divergence (MACD) oscillator has improved but it has not (yet) crossed the zero line for an outright-buy signal.
In this weekly Japanese candlestick chart of NIO, below, we do not have the benefit of seeing today's rally. This chart as it stands now is bearish. The slope of the 40-week moving average line is bearish. The weekly OBV line is pointed down. The MACD oscillator is bearish.
In this daily Point and Figure chart of NIO, below, we can see an upside price target in the $16-$17 area.
Bottom line strategy: While many traders would love to know for certain that China is going to resume its position as a strong and growing economy, I on the other hand want to see a strong base formation on the chart.
