Trade setup: NIO

NIO, Inc. designs, manufactures and sells smart and connected electric vehicles. It manufactures autonomous driving electric vehicles integrated with next generation technologies and artificial intelligence.

The whole sector has been on fire in the last few months. In the last couple of weeks it has been taking a breather. Very healthy behavior after a monster move.

Nio is currently flagging above previous ATH at $56.78 and a break of the current flag resistance triggers a very good risk/reward trade.

The stock has been consolidating in below average volume after the textbook high volume breakout in December 2020. This is a very positive sign of more strength to come.

If NIO breaks out the move should be powerful with a profit taking target zone of $64 to $70 in the short term.

Entry is good anywhere from today's level to low $55's. A conservative stop loss is set at around $54.

I am playing this trade with out of the money March 19 expiration Call options and my plan is to sell a third of the lot at $64, a third at $67 and let the last third run to $70.

If NIO breaks below $54 I will exit the trade.

DISCLAIMER:

The above are my opinions only. Due your own diligence and trade at your own risk. Nothing contained in this website should be construed as investment advice. Any reference to an investment's past or potential performance is not, and should not be construed as, a recommendation or as a guarantee of any specific outcome or profit.