When we last wrote about Nio Ltd. (NIO) on July 7 we said, "The charts of NIO are very strong. If you put aside worries of buying shares in a Chinese company and hype around EV and trade spats, etc. you will have an easier time going long. Aggressive traders could try to go long closer to $10 if possible risking a close below $8. The $22 area is our price target for now."
With prices now reaching our $22 price target another look at the charts and indicators is in order.
In the updated Japanese candlestick chart of NIO, below, we can see the shares have reached the $22 area after a July dip toward $10. Our stop suggestion was obviously not reached. If you are still long, here is what I see going on now:
Prices are trading firmly above the rising 50-day moving average line and above the rising 200-day moving average line. I would consider prices extended (overbought) versus the 200-day moving average line. The On-Balance-Volume (OBV) line has moved higher the past year to tell us that buyers are more aggressive and to confirm the rally so far.
The 12-day price momentum study in the bottom panel tells a different story. Price momentum has slowed from July to late August to now. This is a bearish divergence when compared to the price action which has made higher highs. A slowing pace of the uptrend is foreshadowing a possible reversal. This is not an automatic sell signal but rather a heads up that things are changing beneath the surface.