Is Nio Oversold?
Nio, Inc (NYSE:NIO) fell 6% to the $14.46 level on Friday before bouncing up to trade flat to Thursday’s closing price.
Nio’s relative strength index (RSI) is measuring in at about 35%, which puts the stock near oversold territory.
RSI is an indicator technical traders use to measure bullish and bearish price momentum. RSI levels can range between 0 and 100, with levels between 30 and 70 generally considered to be healthy.
When a stock’s RSI falls below the 30% leve,l it's considered to be oversold. When a stock enters oversold territory, it indicates the securities price no longer reflects the asset's true value, which can signal a reversal to the upside is in the cards.
When a stock’s RSI rises above the 70% area, it is considered to be overbought. When a stock enters overbought territory, it signals the securities price is elevated to its intrinsic value, which can signal a reversal to the downside is on the horizon.
RSI is best used when combined with other signals and patterns on a stock chart because stocks can remain in oversold and overbought territory for an extended period of time before reversing.
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The Nio Chart: Nio negated a small uptrend on Thursday, when the stock printed a lower low under the most recent higher low of $16.40, which was formed on May 2. On Friday, the stock dipped lower but found support near the $14.40 level and bounced north.
- If Nio closes the trading day above about the $15 level, the stock will print a hammer candlestick on the daily chart, which could indicate a bounce up to at least print a lower high is on the way. If the stock closes the trading day near its low-of-day price, it could indicate lower prices will come on Monday.
- Nio has resistance above at $16.75 and $20.25 and support below at $14.31 and at the 52-week low of $13.01.