NIO - the Chinese electric automaker - has had quite the run over the past year. However, the double top on January 9 and February 11 accompanied by CMF divergence was a major warning sign.
While we have recovered from the lows somewhat, capital inflows are still weak (and trending down), and NIO has failed to recover as much as the S&P 500 since the February lows. This suggests that further downside in NIO is likely unless some external catalyst changes a well-established trend.
Provided for comparison is another Chinese stock known as Luckin Coffee that began trending down over a several month period - as NIO is - but collapsed suddenly afterwards.
While we have recovered from the lows somewhat, capital inflows are still weak (and trending down), and NIO has failed to recover as much as the S&P 500 since the February lows. This suggests that further downside in NIO is likely unless some external catalyst changes a well-established trend.
Provided for comparison is another Chinese stock known as Luckin Coffee that began trending down over a several month period - as NIO is - but collapsed suddenly afterwards.
Comment:
Re: NIO-Luckin comparison. One thing that US investors don't understand is that certain common practices in China are considered "fraud" by the SEC. But it doesn't matter as long as the stock is going up; "fraud" only exists if a stock is declining. Once US investors get trapped in a solid downtrend, however, as we are seeing with NIO and saw with Luckin and many others previously, the SEC tends to go looking for fraud, and it will always find it. Shorting US-listed small cap Chinese stocks in a downtrend should be a study; anecdotally, the payout rate seems to be close to 100%, and I've been following this market since I myself got burned by an organic farming China stock back in 2010.
Trade closed: target reached:
Lower red fib target achieved. Closed 1/2
Comment:
oops. Glad I only closed half.
Trade active:
Re-enter @ 39
Re-enter @ 39