Usman Salis
NIO has made an impressive comeback in recent months, climbing more than 140% from its April low. While this explosive move has brought back investor optimism, the technical picture suggests a breather might be coming - and that's actually a good thing. Instead of chasing the rally at these levels, traders might want to prepare for a strategic pullback that could set the stage for the next major move higher.
Chart Analysis: Elliott Wave Structure in Focus
Looking at the Elliott Wave framework, NIO's rally has followed a textbook pattern. Mind Investor pointed out something important: this is NIO's first genuine impulse wave since 2021, when its broader correction phase started.
The first wave kicked off the breakout after a long sideways grind. The second wave pulled back hard, bottoming near the 0.786 Fibonacci retracement at $3.33. Then came the third wave - the powerhouse leg that delivered most of the recent gains with serious momentum behind it. The fourth wave formed a corrective structure, giving the trend time to reset before pushing higher again. Now the fifth wave has driven into the $7.75 resistance zone (the 0.618 Fibonacci extension), where the rally is running into some real tests.
Momentum indicators tell an interesting story here. The RSI is showing bearish divergence - prices are hitting new highs while momentum is fading. That's usually a sign that a short-term correction is brewing.
Why a Pullback Could Be Constructive
A near-term correction wouldn't actually damage the bullish trend. In fact, it could do three helpful things: validate the impulse structure and confirm April's bottom as a real cycle low, reset the overheated momentum indicators so the next leg up has more fuel, and give long-term investors better entry points instead of forcing them to chase at stretched levels.
Broader Market Drivers for NIO
The rally hasn't happened in a vacuum. China's EV policy support has ramped up, with subsidies and infrastructure investments boosting demand across the sector - and NIO has been a direct beneficiary. Sentiment toward Chinese equities has improved too, with capital flowing back in during Q3. NIO's improving delivery numbers and expansion into new markets have helped the stock ride this wave of renewed interest. And there's been a shift in global risk appetite as investors hunt for high-growth plays while rate expectations ease.
Usman Salis
