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3 Auto Stocks to Trade, 2 Buys and 1 Short

Chris Tyler

Lately, auto stocks have presented some interesting opportunities. Specifically, let’s take a look at what’s happening off and on the price charts of Tesla (NASDAQ:TSLA), General Motors (NYSE:GM) and Nio (NYSE:NIO) and detail positions where bulls and bears can profit with increased odds of success.

It has been anything but a quiet market of late. On Thursday, it was a tweet that sent the S&P 500 rallying 0.85% and finishing at a new all-time high. And auto stocks came along for the ride with the First Trust Global Auto Index (NASDAQ:CARZ) climbing 1.32%.

From his favorite medium, POTUS teased investors by announcing that a Phase 1 trade deal with China was “very close.” And in a rare twist, it turns out the tweet wasn’t fake news. A limited trade deal between the world’s two largest economies was reached after the close of the U.S. market.

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Now that levies are slated to have begun this weekend and existing tariffs are being rolled back on Chinese goods as part of a larger bilateral deal, surely it’s time to park some money in auto stocks, right? It is. But, based on what the price charts of TSLA, GM and NIO stock are hinting at, there’s profits to be made by both bulls and bears in auto stocks.


Auto Stocks to Trade: Tesla (TSLA)

Auto Stocks to Trade: Tesla (TSLA)


Source: Charts by TradingView

The first of our auto stocks is Tesla and it’s a buy. The EV upstart went through a very difficult stretch earlier this year. But following the hard-hitting, corrective decline which landed TSLA stock into a band of longer-term Fibonacci support, shares have rebounded nicely since June. Over the last several weeks, shares have digested those gains in a constructive-looking consolidation high in the right side of its larger base near its all-time highs. Now shares are in position to be purchased after breaking out Thursday.

Trading TSLA Stock: Buy this auto stock today. Expect new and meaningful highs to follow in 2020 given the healthy size base that’s developed the last couple years. I’d set an initial price target at $450 for taking profits. To guard against downside exposure, a 10% stop is an effective way to eject safely in one piece from any potential bearish changes in TSLA stock’s chart dynamics.


General Motors (GM)


Source: Charts by TradingView

The second in our list of auto stocks is General Motors. This is a name I’d park in neutral with the expectation of buying in the near future. GM stock’s monthly view shows that shares have been successfully holding lateral support within a larger uptrend for the last couple years. At the same time, since mid-2018, stochastics have been hinting of an upside resolution for bullish GM investors.

Trading GM Stock: GM stock has already confirmed October’s doji low last month before trading back inside the candlestick. It’s a bullish signal, but obviously has turned more neutral given the price action. My suggestion is to wait for a second-attempt, trade-through entry above $38.29 before buying this auto stock.

Alternatively, if support continues to hold while a bullish crossover signals, a purchase of GM stock at lower levels is sufficient evidence to give a green light to buy shares on constructive-looking weakness.


Nio (NIO)


Source: Charts by TradingView

The last of our auto stocks is China’s Nio. Some Chinese stocks like Alibaba (NYSE:BABA) look great on the price chart. Others, such as Baidu (NASDAQ:BIDU), appear ready to turn the corner after coming under hard times of their own. But not NIO stock.

Despite an alluring narrative, the price chart in NIO is still painting a bearish picture. Shares have rallied over the course of several weeks, but have now hit lateral, overhead resistance. What’s more, a bearish topping candle on the weekly chart and overbought stochastics are warning new lows may be forthcoming.

Trading NIO Stock: With confirmation of the bearish weekly pivot high in hand, NIO stock is technically worth shorting today. However, to gain exposure in this sub $2.50 auto stock and lower capitalization company, buying a limited and reduced risk bear put spread is the recommended and much smarter strategy.

Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.

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