NIO Bouncing Off Hard Support
Updated
Plenty of bad news coming out on this one. Cancellation of a factory in China, reduced government funding for electronic vehicle (EV) development, and profitability going ever into the abyss.
If this thing behaves anything like TSLA, we could see a nice bounce here. But why?
The EV space is rife with optimism and hope due to the disruptive nature of its products. Much like the internet disrupted traditional brick-and-mortar retailers and telecommunications companies, electronic vehicles threaten to disrupt traditional gas-powered transportation. Looking back on the performance of Amazon, Apple, Microsoft and the like over the past two decades, and considering their role in disrupting and creating markets, it is no wonder why investors associate electronic vehicles with a potentially bright future of massive returns. Disruption creates opportunity to take or create markets.
Yet there still remains the fundamental problem of profitability. If a company cannot turn a profit, how can it hope to be successful? Looking into the past, Amazon itself was unprofitable for the first 14 years that it was listed on the stock exchange, yet it was able to survive and thrive on the back of debt financing, steadily increasing its revenue and expanding its supply of collateral (equity). Regardless of the negative fundamental picture for new and disruptive companies, and the risk it poses on their survival, investors often look at them as massive opportunities.
For a stock like this, throw fundamentals out the window - this is the realm of human psychology. Hope, fear and greed will drive the price into insane extremes, and timed correctly, can be quite profitable. The only fundamental here is this: can it continue to acquire debt?
With all of that said, there is a setup to go long here. Hard support sits around 5.5 with plenty of upside on hopes and dreams beyond.
If this thing behaves anything like TSLA, we could see a nice bounce here. But why?
The EV space is rife with optimism and hope due to the disruptive nature of its products. Much like the internet disrupted traditional brick-and-mortar retailers and telecommunications companies, electronic vehicles threaten to disrupt traditional gas-powered transportation. Looking back on the performance of Amazon, Apple, Microsoft and the like over the past two decades, and considering their role in disrupting and creating markets, it is no wonder why investors associate electronic vehicles with a potentially bright future of massive returns. Disruption creates opportunity to take or create markets.
Yet there still remains the fundamental problem of profitability. If a company cannot turn a profit, how can it hope to be successful? Looking into the past, Amazon itself was unprofitable for the first 14 years that it was listed on the stock exchange, yet it was able to survive and thrive on the back of debt financing, steadily increasing its revenue and expanding its supply of collateral (equity). Regardless of the negative fundamental picture for new and disruptive companies, and the risk it poses on their survival, investors often look at them as massive opportunities.
For a stock like this, throw fundamentals out the window - this is the realm of human psychology. Hope, fear and greed will drive the price into insane extremes, and timed correctly, can be quite profitable. The only fundamental here is this: can it continue to acquire debt?
With all of that said, there is a setup to go long here. Hard support sits around 5.5 with plenty of upside on hopes and dreams beyond.
Note
Break of 5.50 support with nothing below, downside is undefined at this point. I have exited with a small loss on my entry position, but intend to continue watching until the dust settles.Note
Got back in at 5.45 as a substantial reversal has formed off of the 5.00 mark.
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