NIO - Why Are You Long On Another Shanghai Disaster?So NIO makes electric cars and is a company from Mainland China, which means that by default it's a Chinese Communist Party state-run enterprise because of the realities of Chinese law and living under the CCP's jurisdiction.
Earnings are tomorrow morning and IV on options are juiced to 150% at the money expiring September 1 and 75% expiring January '24.
It might be pretty easy for this company to print a beat considering estimates are only $1.2~ billion compared to the $1.7, $2.5, $1.8, and $1.5 billion in the prior segments.
But as we've seen with earnings on stuff like AMD
AMD - Greed Doth Bad Habits Breed
Target
Target - Why Is Everyone Desperate To Long Disasters?
Snowflake
Snowflake - Is It Time To Stop Gambling On Chop?
and Disney
Disney - Is Your Compass Upside Down?
That a short lived earnings-linked climax has been the optimal moment to enter short and ride the move towards the bottoms.
The problem with companies rooted in Shanghai is that Shanghai is the toad's den, the headquarters of the faction of former Chairman Jiang Zemin, who died, and is solely responsible for the 24-year-long persecution and organ harvesting campaign against Falun Dafa's 100 million spiritual practitioners.
But even if the company were rooted in Shenzhen, Beijing, or Guangzhou, the problem would be that any company that relies on Mainland Chinese demand to fuel sales, including companies as big as Apple, are in big trouble.
The reason is simple. If you look at Our World In Data and examine how many people died from Coronavirus Disease 2019, the Chinese Communist Party under Xi Jinping claims that 121,563 people have died since the pandemic began.
The United States with less than 1/4th the population has reported over 1.2 million deaths by comparison.
And on top of that, everyone knows how the CCP covered up and lied to the world about the 2003 SARS pandemic.
So let's say for a minute, considering China's population of 1.4 billion compared to America's 355 million people, and that China is the epicentre of the pandemic, that as few as 10 million people actually died.
Now, consider the number of people counting as eligible buyers who have died in China is even higher than this number because of the huge amount of flooding, natural, and manmade disasters that have occurred over the same period of time.
Let's be generous and say that only 15 million people have died.
How does that impact the sales of companies like NIO, Tesla, Apple, and everyone else who has become reliant on the Chinese market?
Perhaps it isn't enough to cause a 2008-style bubble deflation yet, but we're certainly seeing the impact on the balance sheets, aren't we?
And yet people are telling you to get long on NIO.
Technically speaking, the monthly bars show us that since the October dump, every candle, no matter how big the retrace has been, has simply respected the gap created by the dump.
And this is significant because that dump was an astonishing 63 percent in two months.
And at today's prices of $11 this company is still claimed to be worth $15 billion, even while Evergrande has become a penny stock, the Yuan is in huge trouble, and the entire Chinese economy is on the brink of collapse.
Something I have enlightened to in recent times is that reversal patterns are not reversal patterns unless the market has traded to its true bottom.
This was the problem everyone who was trying to long Tesla, Meta, and Amazon all the way down kept running into.
If you buy too early then you have to sit there in drawdown waiting for 25% miracle candles just to break even for a single day.
And so you always have to ask yourself if the market has traded to its true bottom before you decide to donate your retirement funds to the Party longing a retrace.
On the weekly, the breakout to $16 would be bullish, if $7.5 were the bottom
But the problem is that the most meaningful gap on weekly bars was never retraced to after it broke up and it ran away towards $60, and that gap starts at $5.59, almost 50% away from where we traded today.
So is NIO a long? Social media wants you to get long because every dumpster pattern that looks like a disaster is a long, for some reason.
But NIO is not likely to be a long, no matter how nice of a car and how much of a Tesla killer they may arguably make.
But with a $1.2 billion earnings estimate, that's pretty beatable, and so we may see a real retrace tomorrow, however short lived, that could see smart call buyers who exit early or immediately bagging a nice profit.
For everyone else, perhaps it really is worth buying puts at $14 expiring in March of 2024 and closing them off at $5.5
Because NIO is a Shanghai dumpster fire, this thing can go down and down and down and down in accordance with the Hang Seng Tech even if the Nasdaq and the SPX rallies in Q4.
In the meantime, perhaps September will be a bit of an early autumn for the markets, and perhaps for the world-at-large.
Be careful. Shanghai is the "Babylon" spoke of in The Book of Revelations.
Babylon is a city, not a person.
And everyone who put roots there is dirty, perhaps including Tesla and Elon Musk, the man who wants to turn Twitter into the CCP's social credit keystones Wechat/TikTok.
