A significant rally has emerged in EV frontrunner Tesla (TSLA) after breaking out from a triangle pattern observed in early August. The robust gains appear poised to persist for TSLA from a technical standpoint, as the stock remains well within non-overbought territory according to the monthly stochastics, with the upper limit of a long-term uptrend channel indicating resistance above $500. (Discover why Tesla surged on Monday due to a substantial insider purchase from Elon Musk here.) The bullish momentum in TSLA prompts us to examine other EV companies, such as China-based NIO (NIO), as an additional avenue to capitalize on the sector’s upward trend. NIO has progressed from a prolonged basing phase after establishing a significant low in April, coinciding with the U.S. equity market. The ensuing breakout propelled NIO past crucial resistance from the weekly cloud model, a long-term trend-following tool represented by the shaded area on the chart. This signifies a bullish reversal, with the new uptrend bolstered by positive intermediate-term momentum as indicated by the weekly MACD. The base breakout in NIO serves as a bullish long-term catalyst for the stock, both in absolute and relative terms. The relative strength ratio against the S & P 500 Index (SPX) is now trending higher above its 12-month moving average (MA). The monthly MACD is also trending upward, and a recent oversold rebound in the monthly stochastics reinforces a counter-trend signal noted by the DeMARK Indicators in April. Collectively, these indicators suggest over six months of potential upside follow-through. If NIO decisively surpasses resistance at $7.00, derived from previous support at the mid-2023 low, it would serve as another positive technical catalyst for the stock, with the next significant obstacle on the chart being a 50% retracement level at $9.60. Support for NIO can be assessed using the weekly cloud model, which stands at $5.36 through year-end. Given that this level is significantly below current prices, and considering that EV stocks tend to exhibit greater volatility than the broader market, implementing risk management through a percentage-based stop-loss strategy is advisable. —Katie Stockton with Will Tamplin Access research from Fairlead Strategies for free here. DISCLOSURES: (Please note that the authors of this article disclose that, as of the publication date, one or more own TSLA.) All opinions expressed by the CNBC Pro contributors are solely their own and do not reflect the views of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet, or other mediums. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY. 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Tesla gain likely to continue, along with the up-move in this other EV play, according to Katie Stockton
