NIO Inc (NIO) – Hitting the Gas – April 26, 2021

Bullish – NIO – $41.08

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Market Outlook:

After a choppy week, equities closed on a positive not on Friday after recovering from President Biden’s plans to increase the capital gains tax rate for high earners. Despite this, fundamentals remain positive for equities with the economic recovery continuing better than expected with the Fed insisting that monetary policy will not change. The Technology and Discretionary sectors that provided leadership for equities in recent weeks have started to weaken with the defensive sectors of Health Care and Staples starting to gain momentum. Small caps have also lost performance compared to large caps with IWM remaining rangebound and trading below the $230 resistance level. Our overall outlook remains bullish for equities but earnings-related risks remain for the upcoming weeks.

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NIO Trade Idea:
On Friday’s Options Action show, Tony Zhang suggested a potential upside for NIO into earnings. After a significant decline, NIO is primed for a rebound at current levels and provides a good bullish play ahead of earnings this week. NIO has formed a triple bottom at its 200 D MA and $34 support. Despite chip shortages, NIO delivered 20k vehicles in Q1 (423% YoY growth) with its’ battery swapping technology proving to be a success so far. NIO’s 1M trend turned bullish on Friday and with a technical score of 8 out of 10, NIO is a strong stock that will likely continue higher from these levels. View NIO Trade

Sector Outlook

Over the last week, we see the traditionally defensive sectors gain momentum as Technology and Discretionary experienced pullbacks after weeks of leadership. However, with fundamentals remaining positive, we expect Technology and Discretionary to gain momentum once again in the upcoming days as SPY breaks above current levels

XLK – Bullish

The recent pullback in XLK provides better risk/reward plays for Technology stocks. XLK pulled back to its 21 D MA and bounced higher with strong momentum last Friday. We expect a new higher high formed this week if recent momentum can continue. 

XLU – Bullish

Utilities pulled back in recent days after a strong bullish rally and rejecting the $67 resistance level. However, a break above this level could see XLU finally reach pre-COVID levels at $70. Bullish price action at current levels may provide confirmation for long entries.