Chinese electric vehicle (EV) maker NIO Limited (NYSE: NIO) stock has risen over 1,000% in the past year. The upcoming NIO Day event scheduled for Jan. 9, 2021, is set for the unveiling of the new models including an EV sedan as well as delivery updates. This event is usually scheduled at the end of the year but was pushed to January 2021. The event will be held at the Wuliangye Chengdu Performing Arts Center under the theme “Always Forward”. While Tesla (NASDAQ: TSLA) shares have powered the enthusiasm in EVs, NIO shares have spearheaded the momentum in Chinese EV stocks. This caused momentum to spread into battery technology and materials to charging stations further propelling sustainable energy, autonomous technology and ESG themes. With high expectations heading into NIO Day, prudent investors may want to use the momentum to ring the register on some shares at opportunistic exit levels ahead of a sell-the-news reaction.
Q3 FY 2020 Earnings Release
On Nov. 17, 2020, NIO released its third-quarter fiscal 2020 results for the quarter ending September 2020. The Company reported GAAP earnings-per-share (EPS) loss of RMB (-0.98) excluding non-recurring items versus consensus analyst estimates for a loss of RMB (-1.16), beating estimates by RMB 0.16. Revenues grew 145.4% year-over-year (YoY) to RMB 4.53 billion beating the RMB 4.28 billion consensus analyst estimates. Total Q3 vehicle deliveries were 12,206 in the quarter. The Company provided upside Q4 2020 estimates for revenues in the range of RMB 6.26 billion to RMB 6,436 billion versus consensus analyst estimates of RMB 5.36 billion. NIO also projects estimated Q4 deliveries between 16,500 to 17,000 vehicles.
NIO Day 2021 Event
On Jan. 9, 2021, NIO is expected to unveil possibly up to two EV Sedans to challenge the Tesla Model 3. This was hinted at by the CEO William Li in the Q3 2020 conference call. Investors are expecting more details of the sedan with rumors indicating potentially two sedans. On Dec. 1, 2020, the Company had announced that November 2020 deliveries increased to 5,291 vehicles, up 109% YoY. The total year-to-date (YTD) deliveries were 36,271 cars for 2020, up 111% YoY. The Company is expanding production capacity in December to meet the growing demand. On Jan. 3, 2021, NIO provided December 2020 and whole year vehicle delivery figures. NIO delivered 7,007 vehicles in December 2020, up 121% YoY. NIO delivered 17,353 vehicles in Q4 for the three months ending Dec. 20, 2020, up 111% YoY. Full-year 2020 total deliveries were 43,728 vehicles, up 112.6% YoY.
Sell or Buy the News?
With scheduled events, investors tend to buy into the shares ahead of the event and sell the news. The wildcard would be any additional outlier news that investors take investors by surprise, but good and bad. NIO released vehicle delivery figures for 2020 ahead of NIO Day as shares should accelerate with momentum heading into Jan. 9, 2021. There were rumors of a potential Apple (NASDAQ: AAPL) entry into the EV market commencing with a partnership with either Tesla, NIO or Volkswagen (OTCMKTS: VWAGY). As for potential outlier news, the biggest for NIO would undoubtably be a confirmation of partnership talks with Apple. Either way, prudent investors who don’t want to take chances can certainly ring the register at opportunistic exit price levels to lock in profits and scale down exposure.
NIO Opportunistic Exit Levels
Using the rifle charts on the weekly and daily time frames provides a precise near-term perspective of the landscape for NIO stock. The weekly rifle chart formed a stochastic mini inverse pup that fell through the 80-band with a downsloping 5-period moving average (MA) at $45.25. This is a bearish channel tightening formation that projects a sell-off towards the 15-period MA, but bulls were able to surge shares through the weekly 5-period MA. This turns the weekly rifle chart pattern into a make or break that could form a weekly pup breakout if the weekly stochastic turns up. The daily rifle chart is now forming a pup breakout powered by a pretzel stochastic mini pup. There is also a rare seed wave breakout forming due to the sequentially higher market structure lows (MSLs) at $39.51 (MSL 1) and $42.23 (MSL 2). A seed wave provides three precise upside targets called potential reversal zones (PRZs) based on the Fibonacci (fib) level ratio extensions from MSL 1 to the next market structure high (MSH). These PRZs are $52.57 (1.27 fib extension), $54.06 (1.414 fib extension) and $56.24 (1.618 fib extension). These comprise opportunistic exit price levels ranging from the $52.57 fib to the $61.18 fib range. Since the daily upper Bollinger Bands are at the $51.04 fib, anxious investors can use that as the initial profit taking level. It is worth noting that the daily BBs have been in compression and could be forming the expansion stage, which is what would make the higher targets possible. Prudent investors should always consider cashing in some profits into strength, not chasing exits during a panic sell-off.
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