In case you’re on the lookout for a motive to purchase Nio (NYSE:NIO), its worth chart gives a simple one. After notching a brand new file excessive final week at a penny shy of $67, the red-hot momentum inventory quietly retreated to a lower-risk purchase level. Some chartists name it a bull retracement sample; others name it a buy-the-dip setup. Both method, NIO inventory is providing its first tasty commerce alternative of 2021.
Wall Road hearts electrical car shares and is within the strategy of bidding the whole trade to the moon. Tesla (NASDAQ:TSLA) has been coronated because the king and reigns over the land. Its much-celebrated entrance into the S&P 500 final yr was emblematic of EV shares going mainstream.
Now, merchants in all places are piling into seemingly something and every little thing associated to the theme EV. Hypothesis abounds in a brand new string of ticker symbols, however maybe none has fairly captured the zeitgeist like Nio.
NIO Inventory Quantity Goes Increase
The Chinese language automaker skilled an explosion in buying and selling exercise final yr. To wit: its common day by day quantity for the previous 50 buying and selling periods is 180 million shares. Once more, that’s per day. It’s greater than triple the amount in Tesla and even exceeds Apple (NASDAQ:AAPL) over the identical timeframe. If you wish to choose the purpose aside, you would argue the entire greenback quantity isn’t as a lot as a result of NIO’s decrease share worth, however c’mon … we’re nonetheless speaking about an insane quantity of turnover.
What actually boggles the thoughts is the share acquire. Simply over a yr in the past, Nio was flirting with penny inventory standing. Much more, it was one well-placed banana peel away from chapter. Now, it’s surpassed the scale of all however three of the biggest automakers on the planet.
I don’t know what your definition of a bubble is, however climbing from $1 to almost $70 in a single yr is about nearly as good an illustration of bubblicious conduct as I can consider.
That doesn’t imply it’s demise is essentially imminent, thoughts you. Calling for tops and preventing uptrends looks as if a fast technique to the poor home. Simply ask the one (or two) remaining Tesla bears. From my perch, being profitable whereas the bubble is increasing is way simpler than positioning for the potential (inevitable?) pop.
Two Trades to Play
And that brings us again to the unique motive for spotlighting NIO. In case you’ve lengthy sat on the sidelines, afraid to chase the frothy inventory, a pretty entry is now presenting itself. We’ve pulled again to the rising 20-day transferring common.
Check out NIO inventory’s historical past, and also you’ll uncover these have been golden shopping for alternatives over the previous 9 months. In case you’re keen to guess historical past repeats, then contemplate the next trades.
The sky-high reputation of the inventory is shared by its listed choices. Open curiosity is thru the roof throughout nearly all obtainable strike costs. That makes for a brilliant liquid surroundings and simple fills. Listed below are my favourite two commerce concepts: one aggressive and one conservative.
Bare Put: Promote the February $45 put for $1.
This place pays out $100 per contract if NIO sits above $45 at expiration. The choices market is pricing in an 88% probability of success. If you need a extra bullish guess, then bull calls provide a a lot larger payout.
Bull Name: Purchase the March $60/$70 name vertical for $3.
Your max loss is $300 and will likely be forfeit if the inventory sits under $60 at expiration. The max acquire is $700 and will likely be captured if NIO pushes previous $70 by expiration.
On the date of publication, Tyler Craig didn’t have (both straight or not directly) any positions within the securities talked about on this article.
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