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NIO Stock: Pullback or Progress after 4 Straight Weekly Gains?

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NIO (NYSE:NIO) stock has gained 83% year-to-date. Notably, 92% of the gains have come in since May 28—the day the company announced its results for the first quarter of 2020.

NIO stock gained for four consecutive weeks

Another milestone NIO reached is four consecutive weekly gains for the stock. The stock returned 21.7%, 40.5%, 9.0%, and 20.3% for the four weeks ending June 19. There were many positive catalysts propelling the stock higher.

NIO’s positive catalysts propel the stock higher

The company’s results were solid with encouraging guidance. NIO’s chairman, William Li, sounded positive about auto demand returning to China. He maintained that the long-term potential for EV (electric vehicle) growth in China is intact. The company hit record deliveries in May, which underscored the fact that the demand is returning. Also, many analysts turned positive on NIO stock after all of these developments. Bank of AmericaJ.P. Morgan, and Goldman Sachs upgraded the stock in the last month.

Tencent raised stake in NIO

After four consecutive weeks, can NIO stock end in the positive this week? There are factors that could help the stock. On June 19, Tencent (OTCMKTS:TCEHY) announced that it lifted its stake in NIO. Tencent picked 1.68 million ADRs (American Depository Receipts) in June. After the recent buying, Tencent’s stake in NIO has increased to 15.1%. The news gave NIO bulls another reason to celebrate. The stock rose 1.8% in after-hours trading.

Huge investor interest in EV stocks

So far, EV stocks have been hot investments in 2020. Apart from NIO, Tesla (NASDAQ:TSLA) and Nikola (NASDAQ:NKLA) have gained tremendously this year. In Why are Shorts in TSLA, NIO, and NKLA Getting Burned? we highlighted how shorts are on a losing spree in these three stocks since their stocks have surged.

Is NIO stock overbought in the short term?

However, after a strong uptrend, pullbacks are a healthy trend and sometimes necessary too for another rise. Based on some technical indicators, NIO stock looks overbought in the short term. The stock’s 14-day RSI (relative strength index) is 77.1, which signifies an overbought position. This could mean a pullback in the near term.  However, until there’s some negative news either on a macro front or a company-specific issue, NIO stock will likely resume its climb upwards in the medium to long term. Read NIO Stock at $10: Is It Closer than It Seems? to learn more.

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